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NATIONAL BANK, 
 
 OR 
 
 AN APPEAL TO THE 
 
 COMMON SENSE OF THE PEOPLE OF THE 
 
 UNITED STATES: 
 
 ESPECIALLY OF THE 
 
 LABORING CLASSES. 
 
 BY JOHN R. KURD. 
 
 " Where no ox is, the crib is clean ; but much increase is by the strength of the ox." 
 
 NEW YORK I 
 
 PUBLISHED BY W. E. DEAN, 2 ANN STREET 
 1 84.2. 
 
f 
 

 INTRODUCTORY ADDRESS. 
 
 FELLOW CITIZENS : 
 
 You are aware that there is a difference of opinion amongst the people 
 of the United States, on the subject of the Banking System of this country 
 generally, and especially upon the subject of a NATIONAL BANK. 
 
 This difference of opinion has been made at times a matter of party 
 distinction. Each of the two political parties, into which the country is 
 frequently divided, taking opposite sides: one for, and the other against 
 Banks, and one for, and the other against a National Bank. In this way 
 the real subject of enquiry has been lost sight, of. The question with both 
 sides, having been more to know what will favor this or that party, than 
 to know whether Banks are good in themselves, or not ; or whether a Na- 
 tional Bank be a benefit to the country or not. 
 
 It needs but a moment's consideration, however, to convince any one 
 that, aside from all party views whatever, and even on the supposition, 
 that there were no political parties in existence, it a matter of very oreat 
 importance, to know whether Banks, such as our State Banks are, should 
 be sustained or not : whether they are a good, or an evil whether, if a 
 good, they require restraint, or regulation, and if they do require it, what 
 kind of restraint this should be. So also to know whether a National 
 Bank, such as we have had in the country, be useful or not ; and if useful, 
 how and for what reasons it is so. 
 
 No matter what political party be in power, or who may be at. the head 
 of the government, these are subjects to be treated upon their own merits. 
 The interests of party is not to be. taken into consideration in coming to 
 a decision as to the expediency of these institutions. It is a case like that 
 of a question of war or peace, you will readily admit that we should not 
 declare war against another nation, merely because it would benefit this, 
 or that party at home, you would say, that such a subject should be looked 
 at separately, and that we should decide as the permanent well being of 
 the whole nation might seem to require. 
 
 My object is to prevail upon you to take up the subject of Banks, and 
 of a National Bank in this way. To allow if to stand upon its own 
 merits. To discuss it, and to decide upon it, as a matter of importance 
 to the whole body of the nation, and especially the great mass of the 
 people, the LABORING CLASSES. 
 
 The moment is favorable. There are no important elections now pend- 
 ing : and if there were, this is a subject about which persons of the same 
 political party, may reasonably be allowed to differ in opinion. It is a 
 subject, too, not of importance merely for the present moment, or for the 
 present generation ; but it is one, which will continue to be of import- 
 ance for years to come. It is of importance not merely for you, but it 
 will be of the same importance for your children, and for your children's 
 children. 
 
 You have heard repeated declarations that Banks are evils ; and that 
 
 M128563 
 
a National Bank particularly, is a great evil, and, on the other hand, you 
 have heard as positive declarations that Banks are benefits, and that a Na- 
 tional Bank is a great benefit ; but no one has distinctly shown you in 
 what respect Banks are an evil, or what classes of persons suffer by them ; 
 or to whom a National Bank is a great evil, or what portion of the commu- 
 nity may have reason to object to its operations. 
 
 On the other hand again, no one has shown you how Banks are bene- 
 ficial to the people : in what respect they are a good, or under what cir- 
 cumstances of restraint they are beneficial ; neither has any one as dis- 
 tinctly shown you how, or why, a National Bank is desirable for the gene- 
 ral welfare ; however it may interfere with the operations of comparative- 
 ly a very small number of individuals. 
 
 My purpose is to prevail upon you to enter with me into an examination 
 of these particulars. To enquire in what manner Banks generally are 
 advantageous to the nation ; what evils attend their establishment ; how 
 these evils may be remedied ; and what class of persons may be incom- 
 moded by their operations. To enquire, also, in what manner a National 
 Bank is, or may be, advantageous to the country, what objections may be 
 made to such a Bank. By whom these objections may be made, and 
 what the mass of the people has to do with the reasons of these objec- 
 tions. To enquire, in fine, whether the interest of the working classes has 
 been consulted at all, in the hostility so frequently exhibited towards a 
 National Bank, and indeed, to all Banks : and, if this hostility be not 
 founded in any regard for the welfare of the people, to enquire how it is 
 that public opinion has been, in certain respects, so much misled upon the 
 subject. 
 
 In pursuing this investigation, we may be obliged to enter more fully 
 into the examination of some particulars, than is necessary for the under- 
 standing of persons familiar with matters of this kind ; but as there are 
 many to whom the subject is not so familiar, it seems necessary to go 
 back in some degree to first principles, in order to be equally understood 
 by all. 
 
 This mode of treating the enquiry may appear to impose a tax upon 
 your patience ; but the principles alluded to are generally of a character 
 sufficiently interesting to merit attention : even aside from the purpose 
 for which they have been introduced. Beyond this patience, 1 have only 
 to ask your candid and unbiased attention to the statement presented. 
 
 You are most of you of the class of citizens who are, or have been, 
 subject to jury duty, you know the state of mind with which a juryman 
 should come to his seat in any trial of importance. The question of a 
 National Bank, or no National Bank ; of Banks or no Banks, presents 
 one of the most important civil cases, upon which you can be called to 
 give an opinion. 
 
 In exercising your judgment upon the facts and arguments here laid be- 
 fore you, I trust you will feel it a duty to lay aside all party prejudice and 
 personal feeling ; as you would feel it so in a court of justice, where the 
 majesty of the laws, and the well being of your fellow citizens might de- 
 pend upon your decision. 
 
 In this trust I shall submit the case, reminding you only that the wel- 
 fare of YOUR COUNTRY is dependant upon your verdict. 
 
PART FIRST. 
 
 SECTION I. 
 
 Use and Importance of Money Capital. 
 
 IN the working of all machinery, it is desirable that there should be as 
 little loss of power as possible. 
 
 Suppose the steam engine of a factory to be capable of performing to 
 advantage twice as much as it does, with the same expense : there is 
 here a loss of half the power employed. If there be two factories in the 
 same neighborhood, in one of which, with the same machinery, and the 
 same outlay, only half the work is turned out which is produced in the 
 other, the owner of the establishment producing most will be able to un- 
 dersell the proprietor of the other so much, that from this circumstance 
 alone the latter may be obliged to relinquish his business. 
 
 It is equally desirable that a piece of land should yield as much as it is 
 capable of producing with the same labor and expense. Suppose, for ex- 
 ample, a field manured, and plowed, and prepared for seed : if but one half 
 of it be sown, there is here a loss of so much power. If there be two 
 countries, both capable of producing the same quantity of wheat ; both 
 cultivated at the same expense ; but one of them, from want of manage- 
 ment, producing only one half of what the other produces, the country pro- 
 ducing most will be able to undersell the other so much as to shut it out 
 of any foreign market. 
 
 Man himself may be contemplated as a machine of the same kind. If 
 a laborer, able to earn one dollar per day for every working day in the 
 year, be employed but half of this time, there is in his case so much loss 
 of power. Suppose two mechanics, both having it equally in their power 
 to earn one dollar per day, or three hundred dollars for the year ; and both 
 subsisting equally well on one hundred and fifty dollars a year. If one of 
 these persons work only one hundred and fifty days, and the other three 
 hundred days, the first will do no more than earn his bare subsistence, 
 while the other will not only be able to live as well as his neighbor, but 
 he will lay up besides one hundred and fifty dollars at the end of the year. 
 If a year succeed in which it is difficult for these mechanics to obtain 
 work, he who can work the cheapest will soonest find employment. The 
 man who labors three hundred days in the year, can now work for seven- 
 ty-five cents a day, and he will live as well as he did before, and lay by 
 seventy-five dollars at the close of the year ; while he who works only 
 half this time, cannot labor for less than he did before, without depriving 
 himself of some of the necessaries of life. It is the same with nations. 
 
Suppose a country, the inhabitants of which labor three hundred days 
 in the year : and another, where, from the number of holidays, the people 
 work only one hundred and fifty days in the year. The productions in 
 both cases being the same, the country where the people labor most will 
 be able to undersell the other. In the country where there are not so 
 many holidays, the inhabitants may become wealthy ; when, under the same 
 circumstances, except in this particular, the inhabitants of the other coun- 
 try may be impoverished, and barely able to sustain themselves. 
 
 The result would be the same, if in one country only half the people 
 labored, while in the other they were all alike employed. Where the 
 greatest number of the people labor, in proportion to the whole number of 
 consumers, there, other things being equal, the productions of the country 
 will be afforded at the lowest rate. The difference arising from the loss, 
 or gain, in labor power. 
 
 What is true of loss of power in regard to the labor of men, or to the cul- 
 tivation of land, or to the working of a machine, is equally true with regard 
 to capital, or to that part of property which is capable of being employed 
 so as to yield a profit. 
 
 Suppose a man to earn by his labor three hundred dollars a year, while 
 his whole expenses do not exceed two hundred dollars. At the end of 
 the year, he will have one hundred dollars, to be lent on interest, or to be 
 employed in trade, so as to give him a profit. This one hundred dollars 
 is so much capital. If this capital be placed out at interest, the one hun- 
 dred dollars has the power of producing six or seven dollars at the end of 
 the year. If it be employed in trade, it will probably produce more ; as 
 interest may be considered somewhat less than the lowest profit expected 
 in the place where it is given ; no one, as a general rule, being willing to 
 give more interest for money, than he expects to make profit out of it 
 while many will pay interest for a very small gain over and above this inter- 
 est. If this capital of one hundred dollars, however, be allowed to remain 
 idle, it gains neither interest nor profit. Here, then, is so much loss of 
 power in capital. Of course the importance of this loss of power increases 
 in proportion to the amount of capital, or of any number of capitals, thus 
 left idle. 
 
 All the capital in the world may be considered as so much saving from 
 the compensation of labor of some kind, after deducting expenses. The 
 capital of every country consists of the savings of labor of that country, 
 together with the accumulated savings of labor which have been brought 
 into it from other countries. A nation becomes richer, or more prosperous, 
 in proportion as more or less of the whole capital of the country is employ- 
 ed so as to yield a profit. If only half the amount be employed which 
 might have been employed to equal advantage, the nation will not increase 
 in riches half as much as it might. 
 
 Suppose two countries with each the same amount of capital, and each 
 subject to the same expenses for consumption. If one of these countries 
 employ only half its capital, and the other employ the whole, both at the 
 same rate of profit, the last will be able to furnish its produce, other, th'ings 
 being equal, at a rate so much cheaper than the first, as perhaps to shut it 
 out of a foreign market. 
 
 Suppose two men employed in the same trade, each having a capital of 
 ten thousand dollars, and each being subject to the same expense of'iiving, 
 equal to the profits on one half of this capital. If one of them employ 
 the whole of his ten thousand dollars, he will be able, besides his expen- 
 
ses, to lay up as much more at the end of the year ; while the other, who 
 keeps five thousand dollars of his money idle, may be barely able to make 
 both ends meet. The first will therefore be able to undersell his neigh- 
 bor, and accumulate a surplus from a reduced rate of profit ; while the 
 other must deprive himself of some of the necessaries of life, in order to 
 sell his goods at the same prices. Such is the consequence of the loss of 
 power in respect to capital. 
 
 The operation is the same with nations. As we have seen, where the 
 capital of both countries are the same, the country which employs most 
 of its capital will have the advantage of the other ; but we may go still 
 further. Suppose two countries, one of which has a much larger capital 
 than the other, but which does not employ so much of this capital as it 
 might : the other with less capital employs the whole amount ; other cir- 
 cumstances being the same in both cases. The country with the smallest 
 capital is able to compete so much the better with the richer country, in 
 proportion as one has a great deal of its capital lying idle, while the other 
 gives full employment to every dollar that can be scraped together. Hence 
 the less capital any country may possess, in proportion to the capitals of 
 its richer neighbors, the more desirable it is that there should be no loss 
 of power, by allowing any part of this smaller capital to remain idle or 
 dormant. 
 
 Great Britain affords the example of a country where there is probably 
 the least loss of power, either in respect to time, labor, or capital ; and to 
 this peculiarity she is no doubt indebted for much of her pecuniary 
 prosperity. 
 
 Spain and Italy, on the other hand, afford examples of power lost, in all 
 these particulars. A great portion of the year, in those countries, being 
 occupied with holidays, and the habits of the people inducing them to la- 
 bor only so much, and so long, as may be absolutely necessary for their 
 subsistence. The wealth of these countries being in possession of com- 
 paratively a small number of persons, and many of these persons allowing 
 a large part of what they possess to be in a great degree idle and unim- 
 proved ; while there are few or no institutions to enable the small capi- 
 talists to bring their means together, in order that the whole sum may be 
 employed by those, who would be able and disposed to make a profitable 
 use of it. 
 
 In most of the old countries, as they are called, the capital, though in 
 few hands, is abundant in proportion to the opportunities of employing it. 
 Under such circumstances, the occasion of economizing this kind of power, 
 is less sensibly perceived. In the United States of America, on the con- 
 trary, as in all new countries, the capital is small in proportion to the va- 
 rious profitable uses to which it may be applied. With a very few indi- 
 viduals there may be an abundance of capital, but with the mass of the 
 people engaged in business there is a want of it ; and in any competition 
 which arises in trade or manufacture, between these United States and the 
 nations of the old world, those countries, having by far the largest capitals, 
 will possess in this respect an almost overwhelming advantage. Hence 
 in the United States it is particularly desirable that all the capital which 
 the country can command, from whatever source it may be derived, should 
 be drawn into active operation, and should be so continued, that in this 
 particular there may be no loss of power. 
 
8 
 
 N. B. The important advantages of capital may perhaps be further illustrated 
 by a few instances of the inconvenience resulting from the want of it. 
 
 As capital unemployed is power lost, so the unemployed faculties of enterprise 
 and industry are equally power lost. Add to this, we may say, as a general rule, 
 the faculty of capital, and the operative faculty, must be brought together, or the 
 power of both are Jost. 
 
 Suppose a person to possess an immense tract of land in a country entirely unin- 
 habited. Such an individual is a large capitalist in land, but as there is no one to 
 improve his land, his capital is idle. It is entirely unprofitable, for want of being 
 brought within the reach of the enterprise, activity and labor, of those who might 
 improve it. Here is so much lost power in capital. 
 
 Suppose, on the other hand, a number of persons accustomed to farming, to be 
 brought together in a place where there is no land to be cultivated, and to be in a 
 situation disenabling them from doing any thing else. Here is so much labor power 
 lost, because it cannot be brought within the reach of capital in land- 
 
 It is the same with money. We may suppose a person possessed of a million of 
 dollars, which he can neither employ himself, nor lend out on interest; there being 
 no one within his reach, of enterprise and activity, to make use of his funds. Here 
 is power in money capital lost, for want of meeting with the operative power. 
 
 So, on the other hand, a number of industrious and enterprising persons accustom- 
 ed to different branches of manufacture, may be living in a village on the banks of a 
 rapid stream, admirably calculated for mill-seats, all" idle, and suffering from want 
 of employment. Ask these persons why they do not go to work, set up mills, and 
 engage in manufacturing. They will say they have no money, and there is no one 
 from whom they can borrow any. They cannot build mills without money. They 
 cannot procure the raw material without money, they are therefore idle. Here is a 
 loss of Labor power, for want of being brought within the reach of money capital. 
 
 Suppose in the same place some person to come forward with money sufficient to 
 build mills, and furnish machinery, but not having means sufficient to purchase the 
 raw material. The mills when built, are idle, and the people are still idle. Here 
 there is a loss both of money power and labor power, for want of sufficient capital. 
 
 We may see the same operation in a town or city. There may be vacant lots ; 
 there may be materials for building; there may be abundance of mechanics and la- 
 borers desirous of employment, but if there be no money with which to build, all this 
 power in lots, and materials, and labor, remain idle for want of sufficient capital. 
 So in ship-yards, materials and workmen may abound ; but if no one have money to 
 pay for building vessels, the capital in materials and tools, and the faculty in the 
 workmen, is so much power lost, for want of further capital. The same with the 
 merchant ; his warehouses may be built, his ships may be ready to receive cargoes, 
 his masters and mariners may be anxiously waiting for employment ; but if there be 
 not capital enough, to load his vessels, there must be here again a double loss of 
 power. Nor is it the shipping merchant alone that suffers in this way. The grocer, 
 the linen draper, the artizan, and the trader of every description, must not only have 
 the use of capital, but he must have the use of sufficient capiial, to enable him to car- 
 ry on his business advantageously ; and what is true of each individual, is true of the 
 whole nation. The country must not only have capital, but it must have the use of 
 sufficient capital, to enable it to employ that which it has to advantage. Capital un- 
 employed is power lost; the faculty of labor unemployed for want of capital, is 
 power lost; and capital idle, and the faculty of labor unemployed for want of suffi- 
 cient capital, is a double lods of power. 
 
 SECTION II. 
 
 Discrimination to be made between real and fictitious capital. 
 
 IN speaking of the importance of capital, it is to be borne in mind that 
 we mean real and not fictitious capital. The latter, it is true, may some- 
 times be the means of yielding profit to the possessor, but its operations 
 partake of the character of fraud. They may transfer property from the 
 possessions of one person to that of anotber, but what one gains the other 
 loses. The dealer in fictitious property may make a profit on the real 
 property of which he gets possession, but in that case he gains a profit, 
 which does not belong to him, the owner of the real capital being the per- 
 
9 
 
 son to whom the profits on that capital rightly belong. Like all other 
 acts of injustice therefore, dealing in fictitious capital must result in loss 
 to some one, and should like other frauds be discountenanced, on the com- 
 mon principles of justice. Such dealing may not always be accompanied 
 with fraudulent intentions ; and so far it may not be considered criminal, 
 but its result to the community is the same as the execution of an absolute 
 fraud. 
 
 Aside however from the question of justice, real capital is something 
 limited in its amount, it cannot exceed a certain extent, whatever public 
 confidence may be. Fictitious capital on the contrary is unlimited. It may 
 be created to any extent, so long as it is sustained by the confidence of 
 the public, or of a sufficient portion of the public. At the same time, like 
 other frauds, it must ultimately be rJetecteJ ; and whenever the illusion 
 vanishes, a reaction takes place in proportion, and more than in propor- 
 tion to the magnitude of the fiction. The advantages supposed to have 
 been gained, disappear, and the loss falls upon those who are compara- 
 tively most innocent of the cause, and least able to suffer the disasterous 
 consequences. 
 
 Heal capital is something which has cost so much labor ; more or less 
 of it may be brought into activity, but the whole quantity of it cannot be 
 increased except by labor. More or less of it may be withdrawn from ac- 
 tivity : it may be more or less in demand for use ; but wherever it is, 
 whether dormantor active, it has a value attached to it ; and although the call 
 for it may vary, the reaction in its value can never be so ruinous, as in the 
 case of fictitious capital. Time is required for the increase of real capi- 
 tal, because it requires labor, but fictitious capital may be increased sud- 
 denly, or at once, almost to any extent, and it may as suddenly disappear. 
 
 The laborer, who lays by one hundred dollars every year from the sa- 
 vings of his labor, requires two years to lay by two hundred dollars. But the 
 man who passes his check or order upon a Bank, where he has no money, 
 for two hundred dollars, raises this amount as it were in an instant ; and 
 this fictitious capital lasts as long as the check passes from hand to hand, 
 before it gets to the Bank; but as soon as it comes there and the real character 
 of the check is detected, the illusion vanishes, and the last holder, having 
 parted with this real capital in exchange for what proves to be fictitious, 
 loses the whole. We have only to suppose a multitude of laborers, each 
 requiring a year to lay by one hundred dollars, to perceive how slowly in 
 comparison, real capital increases ; and we have only to imagine a state 
 of great public confidence, in which a multitude of persons give their or- 
 ders or checks on a Bank, or Banks, where they have no money, which 
 checks are passed from hand to hand, to perceive how suddenly fictitious 
 capital may be created ; and we have only to imagine further, a moment, 
 when this state of confidence ceases, and each of these orders is brought 
 to the Bank, upon which it is drawn, to perceive how suddenly this ficti- 
 tious capital may all disappear ; and what a loss it must occasion to the 
 last holders of these orders. All persons giving out promissory notes, 
 and all Banks issuing bills, give orders on themselves. If they have in their 
 possession the real capital to meet their notes or bills, their orders represent 
 so much real capital, forthcoming whenever it is called for ; but if they have 
 nothing whatever to meet their drafts, their orders, then represent nothing ; 
 and whatever use may be made of them, or through whatever hands they may 
 pass, they are only fictitious capital. As soon as the state of confidence 
 oeases, and every note or bill is tried, that is, as soon as every order is 
 
 2 
 
10 
 
 brought to the point upon which it is drawn, the bubble bursts, and ruin to 
 the last holders is the consequence. Whatever the number of actors may 
 be, and however important may be their operations, the whole multitude 
 act the part of the man, who draws a check upon a Bank where he has no 
 money. The injustice and inexpediency of such a state of things are 
 evident. The inexpediency appears more strongly, when we consider 
 how unavoidably this real and fictitious capital become mixed together, and 
 how difficult it is to distinguish between them, after they have passed from 
 first hands; how much every increase of fictitious capital leads to an increase 
 in the imaginary value of every article boughtor sold, and how much this in- 
 crease of imaginary value leads to a further increase of fictitious capital. 
 
 If in a community, possessing one hundred millions of capital, the pro- 
 duct of labor, this capital be suddenly supposed worth two hundred mil- 
 lions, although the property, by which this estimate is made be precisely 
 the same as it was before, no sooner does anything happen to bring the 
 matter to a test, than this imaginary one hundred millions disappears. There 
 is nothing in the Bank to meet the order ; and the loss falls upon the last 
 holders, who were perhaps entirely innocent of any share in promoting 
 the error. Meantime the fiction has been the means of transferring pro- 
 perty from one hand to another ; a few individuals may be richer for it, 
 but real capital is not increased. 
 
 We must bear in mind, however, that there is an important distinction 
 between fictitious capital, and borrowed capital. Borrowed capital may be 
 as real as that which is not borrowed. If the laborer, who has laid by 
 one hundred dollars in silver, from the earnings of the past year, lend this 
 money to his friend, to be used perhaps in his business as a grocer. This 
 one hundred dollars is as much real capital after it is lent, as it was be- 
 fore. It is as much real capital in the hands of the grocer, as it was in 
 those of the laborer. Suppose the grocer deposit the one hundred dol- 
 lars in the Bank, and allow it to remain there, it is still the same real 
 capital that it was. It still represents the one hundred dollars worth of 
 labor saved from the years' earnings. Suppose the Bank lend this one 
 hundred dollars to a linen draper, who uses it in his trade ; it is still the 
 same real capital in the hands of the linen draper, that it was at first in 
 the money box of the laborer ; and yet it has been borrowed capital in the 
 hands of every holder from the time it left those of the laborer. 
 
 Real capital, however, although it may be borrowed and lent, and lent 
 and borrowed again, without changing character, cannot be increased in 
 amount without labor. If the grocer wish to borrow fifty dollars more 
 of the laborer, he must wait till the latter has laid up so much money ; for 
 if the laborer lend only his note to be paid from the earnings of the next 
 six months, this note is fictitious capital, and not real, until the earnings 
 have been actually laid by to meet it. As then real capital requires labor 
 and time to be increased in amount, there can be no such sudden and un- 
 limited increase of it, as in the case of fictitious capital ; and as, on the 
 other hand, labor generally speaking, leaves its value behind it, there can- 
 not be the sudden and extraordinary depreciation in real capital, to which 
 fictitious capital must be subjected. At the same time real capital, wheth- 
 er in the possession of a lender, or borrower, can have nothing of fraudu- 
 lent character attached to it. The laborer who has laid by his money, has 
 a right to lend it, and has a right to the interest paid for the use of it ; 
 and the borrower has a right to all the profits gained by the use of it, after 
 paying the interest. 
 
11 
 
 Fictitious capital may be created by the promises of individuals, of 
 Banks, or other incorporated institutions, or of governments. If a mer- 
 chant give out a note payable in six months, in expectation, that his profits 
 will enable him to pay it when it becomes due ; this note is fictitious capi- 
 tal till the profits be earned. If a bank, or trust company give out a note, 
 or bond, to be paid by something that is to be earned, this also is fictitious 
 capital till the earning is made to meet it. If the government issue its 
 notes, or bonds to be paid out of the revenue of another year, this also is 
 fictitious capital till the revenue accrue. If the merchant give out his 
 note at six months without any expectation, or intention of paying, and 
 without the ability of paying it : calculating that his credit will give cir- 
 culation to the note, and enable him to raise money from it, this, it is evi- 
 dent, is not only creating fictitious capital, but it is perpetrating a fraud. 
 If a Bank, or trust company issue notes or bonds, merely upon the cal- 
 culation that its credit will give these paper promises circulation ; and 
 without the ability, or intention of paying these obligations, this also is 
 not only creating fictitious capital ; but it is as much a fraud, as any that 
 an individual can be guilty of, in obtaining money on false pretences. And 
 if a government issue its promises to pay, without any intention of re- 
 deeming these promises, this also must be a fraudulent transaction : while 
 these promises remain unredeemed. Whether bearing the name of assignats 
 or exchequer bills, or government bonds, or treasury notes, they are all as 
 much fictitious capital, as the promises of the merchant, who gives out a 
 note, which he cannot, and never intends to pay. 
 
 Such being the nature of fictitious capital, it is easy to perceive how sud- 
 denly it may be increased ; and how subject it must be, both to increase and 
 to decrease, and consequently how directly it must produce a corresponding 
 fluctuation in prices. If in a community possessing a real capital of one 
 hundred millions of dollars, there be one hundred millions of fictitious capi- 
 tal added and mixed up with the real ; the property belonging to this 
 community, being precisely the same ; the prices must be doubled, or 
 doubled on an average, some articles more and some less. But the whole 
 property being still the same, it is evident that the representative of real 
 capital has depreciated in value by being mixed with fictitious capital, pro- 
 ducing the difference in price.* In other words, the currency has depre- 
 ciated, what is called currency, being the money denomination by which 
 
 * A silver dollar, for example, is a representative of so much real capital,being the 
 product of a certain amount of labor which can hardly vary; or which varies very 
 slowly, and almost insensibly; depending on the facility of working the mines, of 
 purifying the metal, of coining and bringing the coin into market. 
 
 If in a place where the paper currency has depreciated one half, a laborer despo- 
 site one hundred silver dollars in a Bank, which pays out only paper, the laborer's rep- 
 resentative of real capital, immediately loses one half of its value, and even with- 
 out going to this extreme, if in consequence of excessive issues of Bank paper, (the 
 Banks still paying specie,) property of various kinds, so rise in price that it requires 
 a dollar and a half to purchase what a dollar did before, the silver dollar will repre- 
 sent only two thirds of what it did previously. This depreciation of the represen- 
 tative of real capital arising, as we may say, merely from the circumstance of its 
 being found in so much bad company. The consequence of the first of these suppo- 
 sitions must be, that the laborer will not again put his silver money into the Bank : 
 so, from the moment a Bank stops paying out specie, specie will no mofe go in to it. 
 Under the second supposition, the silver dollar will go to other places, and countries 
 where there is not so much of this bad company, and where it will be able to com- 
 mand its due proportion of real capital : so, whenever paper money is too abundant, 
 the precious metals will disappear, being better treated where there is less deprecia- 
 tion of the currency. 
 
12 
 
 property is estimated ; two hundred millions of capital, representing now no 
 more property than one hundred millions did before ; the dollar therefore 
 is only half of what it was. If the creation of fictitious capital be continued, 
 the currency will continue to depreciate ; if this creation be from time to 
 time checked, and again increased, the currency will fluctuate. 
 
 The increase of prices, benefits comparatively a very small number of 
 persons. Those who are large holders of property : the small holders are 
 next benefited, and so in proportion ; but the laboring man and those who de- 
 pend upon their daily, or weekly earnings, gain nothing by the rise in 
 price ; on the contrary they are obliged to pay more for their food and 
 clothing, and shelter, while it is a long time before the depreciation of the 
 representative of capital or of currency raises the price of labor. It scarcely 
 indeed does so, before a reaction takes place. When prices again fall, the 
 large holder of property procured on credit is ruined ; the consequences of 
 his ruin falls upon those who have trusted him ; this again brings ruin upon 
 others ; and by the time the laboring man, and the mechanic can purchase 
 their food and clothing on better terms, this general ruin checks the demand 
 for labor, and the rate of wages falls more than the prices of the com- 
 modities, for which the laborer has so much need. 
 
 We see then, that in every point of view, while it is desirable to bring 
 into active employment all the real capital to be commanded ; whether that 
 real capital be in the hands of owners, or borrowers ; it is equally de- 
 sirable that the creation of fictitious capital should be discountenanced and 
 prevented. 
 
 The point we have now to ascertain, is, in what way real capital can be 
 most brought into activity, without incuring the danger of bringing ficti- 
 tious capital along with it. 
 
 SECTION III. 
 
 Utility of Banks in collecting and bringing into use real Capital, by their 
 Stocks, their Deposites, and their Circulation. 
 
 When we speak of capital, we are apt to think only of large amounts 
 of property, in the hands of single individuals, or in the possession of cer- 
 tain institutions ; and it then appears to us, as if all anxiety about the em- 
 ployment of capital, resulted from a disposition to make the rich richer. 
 But this property in the hands of wealthy individuals, or of moneyed insti- 
 tutions, as they are called, is but a part, and comparatively but a small part, 
 of the capital of a country like that of the United States ; and it is just 
 that part about which there is the least occasion for anxiety ^ as wherever 
 money is collected together in masses, under the direction of men of wealth, 
 there is no fear but (hut-it will be fully employed ; and in such cases it may 
 be safely left to itself. 
 
 The capital of a country, however, comprehends all the money that is 
 in every one's pocket, arid all the property that is in every one's posses- 
 sion. The poorest day laborer, who has a dollar more than is necessary 
 for his immediate wants, has just this portion of the capital of the whole 
 country. The shop keeper, who has ten dollars in his drawer more than 
 he has immediate occasion for, has just so much spare capital unemploy- 
 ed ; and the old lady, whose whole property consists of twenty dollars in 
 silver change, laid up in an old stocking, is a capitalist to this amount, as 
 
13 
 
 well as the old gentleman whose hundreds of thousands may be invested 
 in the stocks, and in real estate, and whose spare thousands may for weeks 
 remain to his credit on the books of the bank. 
 
 Suppose in a country where there are no Banks, ten millions of persons 
 keeping their money in gold and silver by them ; including the larger sums 
 which they would be disposed to lend out, if they had opportunity other 
 sums which they cannot lend out, because, although not wanted immedi- 
 ately, they will be wanted in a few days or weeks and smaller sums, 
 wanted from day to day for the ordinary purposes of life. Suppose that 
 each of these persons had, in this way, upon an average, fifty dollars in 
 hard money some indeed having nothing, others having several hun- 
 dreds : many having but from one to ten dollars each others twenty, 
 fifty, or one hundred, &c. These ten millions of persons, with fifty dol- 
 lars each, would together furnish an available capital of five hundred mil- 
 lions of dollars ; and this real capital, too, being in hard money, and the 
 savings of labor ; and yet this whole five hundred millions of dollars distri- 
 buted, as it is, in small sums amongst so many millions of persons, is un- 
 employed and unproductive. Some cannot employ their money, although 
 amounting to hundreds of dollars, because they do not know how, or be- 
 cause they are afraid to invest it ; with others, the amount they have is too 
 small, or the time it will remain with them too short, to make it an object 
 to employ it. Now, although these ten millions of persons may each of them 
 think it of very little consequence whether their small savings, and money 
 wanted from day to day, be improved or not, it is clear that there is here 
 au immense amount of real capital, capable of being safely and profitably 
 employed by thousands even of these very ten millions of persons, who 
 need capital to enable them to operate to advantage in their respective 
 branches of industry. To bring such capital as this into active use, is one 
 of the designs of what is called the Banking System, such as it is in this 
 country a purpose as conducive to the general prosperity, as it is bene- 
 ficial to the multitude of individuals needing the assistance to be afforded 
 them by these means. Without Banks, in the case supposed, this amount 
 of five hundred millions of dollars remains dormant or idle, affording an 
 instance of so much loss of power. With Banks, this amount is brought 
 into active operation, millions of families are provided for, and the pros- 
 perity of the country promoted ; that is, promoted, provided the system be 
 not carried to an extreme, producing an artificial state of things an 
 extreme only to be avoided by confining the system to its proper purpose, 
 that of the employment of REAL CAPITAL. 
 
 From what has been already stated, it will readily appear that the proper 
 and lawful design of a Bank, is not to create capital where none exists 
 which, in fact, would be creating only what is fictitious but to bring into 
 use the capital otherwise remaining idle, and to call in such as may be 
 wanted in the neighborhood of the Bank, from other places where it is not 
 wanted. If Banks do more than this, if they attempt to CREATE capital, 
 they go beyond the limit of their business ; they abuse the power com- 
 mitted to them, and become the means of doing injury, instead of doing 
 good. For this error, however, the Banking System, properly conducted, 
 is not answerable. The reproach falls upon the individuals who conduct 
 the business improperly. Since, however, amongst the conductors of 
 Banks, there must, and always will be, persons of every variety of charac- 
 ter and circumstance, the desirable object is, not to abolish the Banking 
 System, but to furnish it with such checks and regulations, as may be re- 
 
14 
 
 quisite to prevent abuse of power, and to remedy errors of judgment on the 
 part of any of those engaged in the management of these institutions. 
 
 A Bank gives activity to capital, by lending out its money to those who 
 employ this money in business. Here there are two parties benefited : 
 the party concerned in the Bank, by receiving interest on the money lent 
 and the party borrowing, by the profit made, over and above the interest 
 required for the use of the money. 
 
 There are three means by which a Bank obtains the money thus lent : 
 
 1st. The sums contributed by subscribers, or stockholders, constituting 
 what is called its capital stock. 
 
 2d. The sums left in the Bank at different times, partly for safety, and 
 partly for the convenience of those to whom they belong, which sums are 
 called its deposites. 
 
 3d. The smaller sums held in place of its own notes, or bills ; each 
 Bank note being, in effect, an order given by the Bank on itself, for so 
 much money which it has received, and which is to be returned when 
 called for : that is, whenever the note, or order, is presented. 
 
 The capital stock is made up partly by those who have large sums to 
 contribute, and who accordingly take a large number of shares ; and partly 
 by those who have only small sums to contribute, and who take but few 
 shares. To accommodate more especially this latter class, Bank shares 
 are usually from twenty-five to fifty dollars each. 
 
 The larger stockholders, as they are called, are generally persons out 
 of the way of business themselves, or having more money than they want 
 to employ in business. They would be always ready to lend their money 
 without the aid of a Bank, if they could be satisfied with the security of- 
 fered ; but from the mere circumstance of being out of business, many of 
 them do not know so well whom to trust, and they are timid and cautious 
 in proportion, as the sums they have tp lend, are the savings of a long period 
 of industry. They prefer, therefore, putting their money into the capital 
 of a Bank, to be lent out by the directors these directors knowing best to 
 whom money may be lent with safety ; and in case of any bad debt, the 
 loss being distributed in proportion amongst a large number of stockhold- 
 ers, instead of falling, as it might otherwise do, upon a single individual. 
 In addition to this, where there is no Bank, the borrower and the lender 
 cannot always meet each other at the right time. The man who has 
 money to lend, may keep it idle on this account for weeks, or months ; 
 while he who wishes to borrow it, does not know to whom to apply, or 
 where to look for it. Here both parties lose : the holder of money loses 
 his interest for so much time, and the business man loses the opportunity 
 of making the profit he would have earned beyond the interest on the 
 amount borrowed. 
 
 This is still more the case with small stockholders. Those possessing 
 one, two, three or four hundred dollars. Without a Bank they would know 
 still less to whom to lend with safety ; they would be still less likely to 
 meet the trust worthy borrower at the right moment ; while this borrower 
 of one thousand, or perhaps two thousand dollars, would find it still more 
 difficult to collect the amount from several different individuals. He 
 would neither know where to look for them, nor would they know his 
 credit sufficiently if they met with him. Such must be the case espe- 
 cially with numbers of widows and orphans, whose property is now in- 
 vested in bank stock. These small sums would frequently be idle, or be 
 left in unsafe hands, if they, or their agents, were obliged to wait till the 
 
15 
 
 right person came along to borrow them. Besides this, the owner of the 
 small sum has the advantage, in a Bank, of joining that small amount to a 
 much larger one, and thus not only lends it when it might otherwise remain 
 idle, but he obtains also for his small loan the same security as that which 
 is given for the large one. 
 
 Here then we see by the institution of a Bank, a variety of capitals, 
 some larger and some smaller, collected together in a common reservoir, 
 a public depot where all who need capital may make application for it. A 
 Bank being a common place of meeting, where the money of the lenders 
 goes to meet the wants of the borrowers, although the borrower and the 
 lender are entirely unknown to each other. By this arrangement, too, the 
 lender's money is not suffered to remain idle ; it is no sooner returned by 
 one borrower, than it is taken by another. Thus accommodating every 
 one, affording interest to one party, and profit to another ; with the advan- 
 tage, too, of a mutual assurance amongst the stockholders, to provide against 
 the risk of loss. 
 
 Nor is it merely from the immediate neighborhood of a Bank, that these 
 various large and small capitals may be collected. Persons in New York 
 may want to borrow more than could be lent them by citizens of New York 
 or of its vicinity ; but there may be others at a distance, who have their larg- 
 er and their smaller sums to lend. Such lenders, indeed, cannot tell who 
 they may trust with safety in New York, but they can place their money 
 in the stock of a New York Bank, and it will then be lent out on the same 
 security as that upon which the money of New Yorkers is lent. Thus 
 capitals are brought into one state from neighboring states, to form Bank 
 capital where it is most needed ; and thus not only the wealthy banker of 
 Europe and Asia may invest his thousands, but the manufacturer also, or 
 mechanic, of England, France, or Germany, and even of Turkey, and Chi- 
 na, may invest his one, two, or five hundred dollars, in the bank stocks of 
 different sections of the United States. Capital naturally flows from places 
 where it is least wanted, to those where it is most wanted, provided there 
 be no want of confidence, either in the liberty or security which it is to 
 meet with. The small capitalist of England, or France, placing his sur- 
 plus with the large capitalists of London, or Paris, and the latter in turn 
 transfering his surplus to the moneyed institutions of the United States ; 
 the rich banker of Europe acting as a supply engine to procure funds for 
 the wants of this c6untry, leaving it to our own Banks to distribute this 
 supply where it is most called for. 
 
 We see, then, that Banks by means of their stockholders, collect a va- 
 riety of large and small capitals, from their own neighborhood, and from 
 distant places ; by which operation, both the owners of these capitals, and 
 the borrowers of them from the Banks, are mutually benefited, and the 
 power of so much capital is saved, which would otherwise be in a great 
 measure lost. 
 
 Let us now see in what manner the deposites of a. Bank are the means 
 of bringing capital into employment, which might otherwise remain idle. 
 
 Almost every member of a commercial community, has from time to 
 time sums of money on hand, to be paid out at some future period, or which 
 he expects will soon be called for. These sums may vary from fifty, or one 
 hundred dollars, to tens of thousands ; the holder of the money may not 
 be the owner of it ; he cannot purchase any thing with it, and cannot venture 
 to lend it out, or he may want it to-morrow, or next day, or next 
 week. With all such persons it must be a great convenience to 
 
16 
 
 place these sums in a Bank ; where the amount, great or small, will be safe, 
 and whence it may be drawn out at any time, at a moment's notice. De- 
 posited in a Bank, these various sums form a fund of which the Bank can 
 make use, by lending out a certain portion of it. The amount in ordinary 
 times, being about the same every day; for if one depositor draw out 
 money, another pays it in. As we may suppose, in a town where 
 there is but one Bank, unless money be sent out of the town ; the man 
 who pays money, and the man who receives it, both keep their accounts 
 in the same Bank, so that although one may draw, and another deposite, 
 in any given day, the whole amount of deposites remains the same. In 
 cities where there are several Banks, it is not precisely the same, but ex- 
 perience shows what the average amount of deposites usually is, and 
 what proportion of it the directors may venture to lend. Some idea may 
 be formed of the importance of these deposites, from the fact, that in 1834, 
 by a return made to Congress, the deposites in about four hundred Banks, 
 amounted to seventy-five millions of dollars. In 1840, the amount in six 
 hundred and sixty Banks, was nearly the same. In 1836 and 1837, it 
 was much greater, but whether more or less, if these deposites, instead of 
 being in the Banks, had remained distributed in every person's house, 
 office, or store, the whole amount would have been so much idle capital ; 
 whereas, in the Banks it became available capital, to be lent out to those 
 who needed it. In the one case, it is so much power lost, in the other, it 
 is so much power employed. 
 
 To make the matter plainer, we may suppose, that in the United 
 States, there are one million of persons, having each, on an average, 
 fifty dollars, to be paid away amongst themselves in a day or two. 
 Neither of these persons can use his money, because he is to have it 
 for so short a time ; but as every one deposiies his money in the Banks, 
 there is altogether in these Banks fifty millions of dollars, which fifty 
 millions, the Banks themselves can lend ; because what one draws 
 out, another puts in. By this contrivance an immense amount of capital 
 is placed in such a situation that it can be actively employed ; while at the 
 same time millions of persons are accommodated by the safety and con- 
 venience of the arrangement ; and thousands are enabled to borrow the 
 amount they need, which otherwise could not be obtained : and at the same 
 time, the Bank, by receiving the interest on the proportion of its loans 
 made from these deposites, is enabled to defray its own expenses, or at least 
 partly enabled to do so. 
 
 The capital thus obtained, too, is the same real capital as it would have 
 been, had it remained in the owner's trunk, strong box, or safe ; for the 
 circumstance of depositing it in the Bank, instead of keeping it in a house 
 cannot make any difference as to the nature of the capital. The case 
 supposed, being merely that of having Banks, where every man's money 
 may be placed for safe keeping and convenience. 
 
 The third means by which a Bank gives employment to capital, other- 
 wise in an unproductive state, is the circulation of its own bills- Besides 
 the sums of money of sufficient consequence to be lent out, or to be in- 
 vested in stocks, or to be deposited in Banks for safety and convenience, 
 there are, as is well known, multitudes of smaller sums, constituting what is 
 called spending money, and pocket money ; sums also kept in tills of the 
 shop keeper, or in the trunk of the mechanic. Sums of one, two, three, 
 five, ten, twenty, and even fifty dollars, many of these sums are continu- 
 ally passing from hand to hand, and form what is commonly understood by the 
 
17 
 
 circulation of the country. The small sum laid up by the laborer, to pay 
 his quarter's, or monthly rent, is part of this circulation ; and so is the 
 dollar paid by the house keeper to the butcher, even while it is passing 
 from hand to hand in the market ; so is every sum large or small, paid by 
 one person to another, while it is in the act of changing hands. 
 
 Where there are no Bank notes, or no Bank notes sufficiently small, to 
 supply the circulation, all these sums, or all these small sums, must be 
 kept in gold and silver, and consequently must absorb, or take up so much 
 of the real capital of the nation ; which cannot be applied to any other 
 purpose, because it is wanted for these daily payments. If there be no 
 Bank bills to be had less than twenty dollars, all sums smaller than this 
 amount, must be kept in hard money; if none less than ten dollars, all 
 smaller than this must remain in hard money. Suppose, in a country of 
 ten millions of inhabitants, each person on an average, to have five dol- 
 lars in this way, some may have none, some may have much more ; but 
 at this rate, there will be fifty millions of dollars real capital, taken out of 
 the trading capital of the country, for the purposes of circulation ; and thus 
 kept as it were idle, so far as interest, or profit is concerned. As if a per- 
 son had one hundred dollars in his pocket, which he might use to advan- 
 tage were it his own ; but as it is not, he says, " I have this money, it is 
 true, but I cannot use it because I have to pay it away to-morrow, or next 
 day." So it is with these fifty millions of dollars circulation, it is all mo- 
 ney that is wanted to be paid away to-morrow, or next day, and therefore 
 cannot be used for other purposes. 
 
 Now suppose a sufficient number of Banks to be established amongst 
 these ten millions of persons ; each of them goes to the Bank in his 
 neighborhood, leaves there his one, two, three, five, ten or twenty dol- 
 lars in hard money, and takes out the small bills of the Bank in exchange. 
 These bills answer all the purposes of circulation, to which the hard 
 money was before applied, while the whole of these fifty millions of dol- 
 lars becomes so much available capital, to be lent out by these Banks, to 
 those who need it, affording an interest to the Bank, and a profit to the 
 borrowers. This too, is real capital, not fictitious, for the ten dollars in the 
 laborers hands, in hard money, was real capital, before he went to the 
 Bank with it, arid that hard money is now in the Bank. The Bank bills 
 given to the laborer in exchange, being simply so many orders of the 
 Bank on itself, for the same amount in hard money, whenever called for. 
 These orders pass from hand to hand, with more safety and convenience 
 than specie, while the hard money they represent, is left in the institution 
 to be used for the purposes of trade. 
 
 The smaller the bills issued by the Banks, the less capital will be 
 withdrawn from circulation, and the more capital the Banks will have to 
 lend out. If there be no Bank bills less than five dollars, all the small 
 sums under this denomination will be withdrawn from trade ; and per- 
 haps the want of small bills is more sensibly felt than larger ones in pro- 
 portion, as their multitude must far exceed the others. Whether more or 
 less, however, whatever may be the amount of hard money required for 
 circulation, it is so much real capital withdrawn from trade, and not yield- 
 ing the interest and profit of which it is capable ; consequently it is so 
 much power lost. Parts or portions of a dollar in hard money, we know 
 from experience are indispensable,* here therefore, of two evils, we must 
 
 * In addition to this we may remark, that the fractional parts of a dollar form 
 
 3 
 
18 
 
 choose the least ; but the same experience teaches us that a paper dollar, 
 provided there be no ground for want of confidence in it, is as convenient 
 for the purposes of circulation as a silver one. It is therefore, an im- 
 portant consideration that every hard dollar in circulation, capable of 
 being represented by a Bank bill, carries with it the loss of so much in- 
 terest and profit, which might have been saved to the country. On the 
 other hand, as capital doubles in amount, by the ordinary process of 
 interest alone, in the course of ten or twelve years, we may form some 
 idea of the immense advantage accruing to the United Sates, for example, 
 by the invention of paper money circulation, even with all the abuses 
 to which it has been subjected. 
 
 SECTION IV. 
 
 Tendency of Banking operations to expansion, and to the creation of fic- 
 titious capital. 
 
 We have now seen in what manner a Bank, or any number of Banks, 
 may be the means of bringing into use, in three different ways, that real 
 capital, which for want of such institutions might remain unemployed and 
 unprofitable. 
 
 We say real capital, for to this their operations should be confined ; and 
 it is important to keep this distinction continually in mind. 
 
 If the subscribers to a Bank, instead of contributing the amount of their 
 shares in hard money, or something equivalent to hard money, and capa- 
 ble at any time of being exchanged for it, contribute only obligations of 
 no value, and incapable of being exchanged for any amount of silver or 
 gold, there is here no real capital. If the depositors of a Bank, place in 
 it only pieces of paper or orders, never to be complied with, because there 
 is nothing to meet them, then there is no real capital here. If those who 
 obtain the bills of a Bank, give nothing in return, but promises never to be 
 fulfilled, there is here also no real capital. Either of these operations 
 would be fraudulent, and it is hardly possible to suppose a case, in which 
 all three of these frauds might prove to have been perpetrated. Such an 
 institution could hardly exist a day, but even if it did, the Banking System 
 in the proper sense of the term, could no more be reproached with an 
 abuse of this kind, than the East India islands could be taken to task for 
 the wooden nutmegs said to be sometimes disposed of for real spices. 
 
 The above is an extreme case, there may be others in which more or 
 less of these kinds of frauds has been practiced, either intentionally or in 
 'effect. 
 
 Cases of intentional fraud may be rare, but as far as the creation of fic- 
 titious capital is concerned, the operation is the same, whatever the inten- 
 tion may have been. 
 
 In some cases, the capital of a Bank may be partly real, and partly, 
 and perhaps, almost entirely fictitious. It may have been made up of the 
 promissory notes of individuals, who believed themselves able to pay, but 
 who may have been deceived in the estimate of their own ability ; or it 
 may have been made up of mortgages on property, supposed to have been 
 
 suras so small, that individuals receive them without sufficient caution, and are not 
 sufficiently vigilant in detecting and punishing impositions. The public therefore 
 cannot countenance these fractional issues, without giving encouragement to fraudu- 
 lent attempts on the currency. 
 
19 
 
 of sufficient value to cover such mortgages, when perhaps this property 
 has been previously incumbered with other mortgages equal to its full 
 value. Such a bank may go into operation, it may receive deposites, and 
 issue its bills in exchange for good notes, and with its deposites, and the 
 notes paid in it may meet its bills for a time : but having no real capital of 
 its own, it will be embarrassed as soon as its bills come in before the notes, 
 for which they were given out come due ; and this especially, if its de- 
 positors, at the same time draw out a large part of their funds. 
 
 A Bank with real capital, may have its deposites partly real and partly 
 fictitious ; that is, they may be composed partly of specie, and bills of 
 other sound Banks, and partly of bills of Banks unable to pay their notes. 
 When this is the case, its own bills so far as they represent a portion of 
 these deposites, represent only fictitious capital, and the Bank becomes 
 embarrassed, or looses heavily as soon as it is required to pay out good 
 money in return for the fictitious capital previously received on deposit. 
 
 Again, a Bank with real capital, and good deposites, may give out its 
 bills in exchange for promissory notes, at first to be esteemed good, but 
 eventually proving to be of no value, when this is the case, every bill 
 put into circulation, in exchange for such notes, represents only so much 
 fictitious capital. Suppose that a Bank lend out the whole of its capital, 
 deposites, and circulation in exchange for promissory notes of persons 
 more or less unable to pay. Just in proportion, as these persons are un- 
 able to pay their notes, the issues of the Bank at first apparently repre- 
 senting real capital, will eventually represent only fictitious capital. 
 
 A Bank then mus*t not only be sound, and go into operation with good faith 
 in the first instance, but it must also be kept in this condition. Such an 
 institution, conducted in the ordinary way, without supposing the intention 
 of fraud, could not give out all its real means at once, in exchange for 
 something fictitious; but there is always a tendency to this disasterous re- 
 sult, and the greater the number of Banks, the greater this tendency. To 
 wait till this extreme of evil is reached, must be folly. The longer the 
 tendency in view, is left unchecked, the more difficult it will be to pro- 
 vide a remedy ; and as the tendency is continually acting, the remedy, 
 whatever it be, must be in continual operation. 
 
 Banks being supposed to have, money at all times to lend, there is a 
 continual pressure upon them, by those who want money, and generally 
 those press hardest, who are to be trusted with most caution. At other 
 times Banks have money to lend, when there is little call for it. The di- 
 rectors are desirous of making some interest for the Bank, out of its 
 funds, and this desire, leads them perhaps to place the amount on the se- 
 curity of the stocks of other incorporated institutions, with the real situa- 
 tion of which they are unacquainted. A period comes when money again 
 is called for, and it is then found that these stocks cannot be exchanged 
 for money, and the amount lent on them, or a great part of them, proves 
 to be only fictitious capital. Not only this, when the Bank is called upon to 
 pay specie for its bills, it must go back to the notes, and securities upon 
 which it has been lending. If these prove to be worthless, or partially 
 so, the stockholders suffer the loss. If these proceedings continue but 
 a short time the evil may not be material ; but if there be no check ; if 
 these loans have been made as if pay-day never were to come ; the stock- 
 holder loses his all, and even the deposites and circulation are in danger. 
 
 Protection therefore against the creation of fictitious capital is as ne- 
 
20 
 
 cessary for the interests of every shareholder of a Bank, as it is for the 
 public welfare. 
 
 The protection of every Bank against the insolvency of its customers, 
 is to be found only in a constant trial of their ability to pay. It is impos- 
 sible for the directors and officers of a Bank, to know with certainty the 
 circumstances of those to whom they lend money ; or the degree of con- 
 fidence to be attached to the securities they offer. It is only by testing 
 the abilities of their debtors, and by testing the availability of their secu- 
 rities, that the Bank can have confidence in them. This is too unpleasant 
 a task, to be readily undertaken by officers and directors. Hence the ne- 
 cessity of some arrangement in the Banking System, making it absolutely 
 necessary for every Bank to be on the watch, that it does not trust any 
 one too far, or too long. If a bank try the solvency of its borrowers, and 
 test the nature of their securities, every thirty or sixty days, a tolerable de- 
 degree of information may be obtained of its own real situation ; but if 
 this trial be procrastinated for six or eight months, the information requi- 
 red, will often come too late ; and still more so if the experiment of this 
 test be further postponed. 
 
 The tendency in the management of all Banking Institutions, is to pro- 
 crastinate in this matter ; and experience teaches us, that unless they 
 themselves are tried, they will not try those upon" whom they depend 
 for their own solvency. If Banks be not subject to a continual test, their 
 customers will not be so ; and just in proportion to the want of this test 
 will be the creation of fictitious capital. On the other hand, if Banking 
 Institutions are confined to their lawful and proper business ; if in pursuing 
 this business, they are so subject to have their own solvency tried at all 
 times, and at any time, that they must unavoidably make as continual a 
 trial of the solvency of their customers ; then, whatever may be their num- 
 ber, there will be no danger of the creation of fictitious capital. The cus- 
 tomer will not give out his note, without having real capital to which he 
 may resort for the payment of it ; and the Bank will not give out its bills 
 without having the notes of customers representing 'real property, upon 
 which it may fall back to meet its own engagements. 
 
 This kind of rigor may appear odious, but it is necessary necessary 
 for the security of the stockholders necessary for the protection of the 
 bill holders necessary to protect the fair dealer upon real capital from 
 the competition of the unfair dealer upon fictitious capital necessary to 
 secure the community against the gradual creation of an artificial value in 
 all kinds of property, eventually resulting in a period of public distress 
 and ruin ; necessary to bring into activity all the real capital to be 
 commanded by a judicious use of Banking Institutions, without involving 
 the disasterous consequences of an abuse of them. 
 
 The lawful and proper business of a Bank, is simply to lend out the 
 real capital collected together by its stock, its deposities, and its circula- 
 tion. It cannot even use all its deposites with safety ; nor the whole of 
 its circulation ; but it may use such part of each, as experience shows, 
 will not probably be called for out of the interest on the monies thus 
 lent, the expenses of the Bank must be paid. The interest received on 
 the amount of deposites and circulation loaned out, often doing little more 
 than paying the expenses of the Bank, the dividends to the shareholders 
 frequently do not exceed the legal rate of interest ; enormous profits of 
 Banking business, properly so called, being entirely out of the question. 
 The large stockholder, perhaps receiving no more interest, than if he had 
 
21 
 
 lent out his money himself; the principle advantage being, with the small 
 share-holder, who, but for the bank, might not have been able to lend his 
 money with safety at all. 
 
 Where the number of Banks is not sufficient, the real capital to be com- 
 manded will not be all taken up ; many who might use it to advantage, 
 will not be able to procure it, and many who have it unemployed, will not 
 obtain an interest for it. Where there are too many Banks, the deposits 
 and circulation will be so much divided, that the interest derived from the 
 lending of these, will not be sufficient to pay the expenses ; and the stock- 
 holders may not be able to obtain so good an income with a Bank, as they 
 could do without it. In either of these cases, the evil will correct itself. 
 Where spare capital is unemployed, there will be a desire to establish 
 more Banks ; and where Bank stock does not afford sufficient dividend, 
 this desire will cease. Such, at least, is the case where all banks are re- 
 stricted to their proper limits, and their proper business ; and where they 
 are judiciously conducted, and confined to the employment of real capital 
 only. 
 
 But Banks are often got up, not so much for the benefit of the stock- 
 holders, as for that of their officers and directors. The officers are in want 
 of places and salaries, and their friends do what they can to serve them. 
 The directors want the opportunity of influencing Bank favors for them- 
 selves and others. Hence more Banks are frequently established than 
 the circumstances of the community require. When this is the case, the 
 proper business of banking is not sufficient to afford a satisfactory dividend 
 to the stockholders. Here,, then, commences the inducement for an in- 
 stitution to go out of its proper sphere, and engage in other operations be- 
 sides those of lending its bank funds. Large stock loans are made, spec- 
 ulations in stocks are entered into, and money is borrowed on one stock to 
 lend on another, with the view of making a small per centage on a large 
 transaction, in order to compensate for the want of income from a more 
 regular banking business. In this manner, uncommon profits may occa- 
 sionally be made; and undue encouragement may occasionally be given 
 to the establishment of a greater number of Banks than are wanted. But 
 these large transactions are frequently attended with heavy losses, and 
 their result usually shows that speculative operations are not to be entered 
 into, in any way, by banking institutions ; the interest of stockholders being 
 generally sacrificed, to promote the private views and interests of design- 
 ing or imprudent individuals possessing a certain influence in the manage- 
 ment of a Bank. 
 
 Bank officers and directors, although generally chosen, as we may sup- 
 pose, for their integrity of character, must have the failings of men. They 
 may be influenced not only by a regard for their own interest, but by a 
 regard for the interests and opinions of others. The officers must please 
 the directors, for on these they depend for their appointments and salaries. 
 They must be popular, too, with the customers of the Bank ; or their want 
 ot popularity may be a ground of their removal. The directors must oblige 
 each other. They must literally do as they would be done by. Their time, 
 too, may be short ; this year they have the opportunity of serving them- 
 selves and their friends next year the management may be in other hands. 
 They receive no other compensation for their services, than the Bank fa- 
 cilities they may control ; and they have, besides their friends, their cus- 
 tomers in business whose means they wish to increase, and whose credits 
 it is their desire to sustain. As a general rule, therefore, without imply- 
 
22 
 
 ing any censure, we may lay it down as a point beyond dispute, that the 
 disposition of every board of direction, as a whole, is to accommodate 
 every one as far as possible ; to enlarge the issues of the Bank; to increase 
 its circulation; and even, as it were, unwittingly to lend on security less 
 and less undoubted. Every Bank, for example, desires to multiply the 
 number of its depositors ; and depositors will not keep their accounts at a 
 Bank where they cannot borrow as much as they think themselves entitled 
 to, or as much as they may obtain at some other Bank. Hence, where 
 there is more than one Bank, when business appears profitable, and capital 
 is wanted, there is a competition in lending, which arises from the general 
 competition for depositors. On the other hand, when times are less favor- 
 able, prices are falling, and failures are apprehended, every influence is 
 employed to help the weak, in order that the weak may be enabled to pay 
 the debts daily coming due, and to enable others to hold their property 
 without sacrificing, till prices again improve. 
 
 It is easy to see that, under such circumstances, unless a Bank be daily 
 in apprehension of some immediate and certain call, to test its own ability, 
 there will be a disposition to lend more and more ; and to do this on security 
 not always of the safest character. What is true of one Bank, in this respect, 
 is equally true of all ; and what is further peculiar to the case, is that, al- 
 though Banks in the neighborhood of each other, are competitiors in busi- 
 ness, it is alike the interest of all to accommodate each other to show to 
 each other the same kind of indulgence shown by each to its several cus- 
 tomers. Suppose in a community of twenty Banks, each to have extended 
 itself in the manner adverted to, till each feels an anxiety with regard to 
 the solvency of a large part of its debtors. If one of the twenty be sud- 
 denly and urgently pressed by the others to pay its bills in hard money, 
 this Bank must stop its usual accommodations ; it must fall back upon its 
 customers, and call in its loans. Suppose these customers, thus suddenly 
 tried, to stop payment ; they not only owe their own Bank, but they owe 
 other Banks, and the customers of other Banks ; and these customers of 
 the other Banks, being disappointed in their collections, stop payment in 
 consequence of the stoppage of the others. The nineteen Banks then very 
 soon find that they are making bad debts themselves, by what may have 
 been their effort to test the strength of another institution. It thus becomes 
 unavoidably the interest of the twenty Banks to sustain each other ; and 
 this so much the more, as they may have all committed the same error. 
 Not one of them, therefore, would willingly be the instrument of causing 
 a shock to the credit of the community, in the consequences of which they 
 must all materially suffer. 
 
 The operation will be the same, if instead of twenty Banks, there be five 
 hundred. It behooves them all to be alike indulgent to each other : and 
 most so, when the state of credit is most critical. Thus, as the tendency 
 of each and every Bank is to expand, so the policy of all banks must be to 
 countenance and sustain each other in this expansion. While, then, we 
 perceive that something is necessary continually to test the credit and sol- 
 vency of each Bank and its customers, we must equally perceive that this 
 test is not to be expected from the voluntary action of the several Banks 
 on each other ; and that especially in periods when it is most required. 
 
 In the preceding cases, we have supposed only honest intentions on 
 the part of all Bank officers and directors. If we go further, and suspect 
 bad intentions in any of them, it is clear that, in proportion to the want of 
 honesty and honor amongst those who possess so great a degree of power, 
 
23 
 
 the evils described must be so much the greater : and the check required, 
 so much the more indispensable. 
 
 From a slight knowledge of mankind, we are easily led to believe that 
 in the community of a single state, where there are forty or fifty Banks, 
 there may be some individuals amongst their conductors, not sufficiently 
 under the restraint of moral and honorable principles. There may be 
 some, even, disposed to create fictitious securities, in order, on the strength 
 of them, to procure available funds from the Banks under their direction ; 
 and there may be others disposed to turn off, upon their own institutions, 
 securities in their own hands, already known to be worthless; and thus 
 save themselves from loss, by sacrificing interests which, as trustees, they 
 were bound in honor to protect. If some such instances may occur amongst 
 the forty or fifty Banks of a single stale, how much more must there be a 
 probability of like occurrences, where there are several hundreds of these 
 establishments, spread over a territory of thousands of miles in extent ? 
 
 SECTION V. 
 Operation of Bank Expansion upon the Currency. 
 
 Having noticed the tendency to expansion, in the management of Bank- 
 ing Institutions, and the consequent increase in amount of Bank notes in 
 circulation, let us now attend to the effect of these particulars upon the 
 value of the Bank notes themselves, or upon what is called the paper cur- 
 rency of the country. 
 
 Wherever Banks are established, most of the money, in sums of fifty 
 or one hundred dollars and upwards, not wanted for immediate use, is de- 
 posited in a Bank, as a matter of safety and convenience. In addition to 
 this, almost every one having a promissory note of another person, instead 
 of waiting till the note is paid, and then depositing the money in the Bank, 
 places the note itself in the Bank, either for the purpose of discount or of 
 collection. Thus a very large part of the money paid in such a commu- 
 nity, is paid into the Banks. Here, then, are two modes in which the 
 Banks get possession alternately of the Bank bills in circulation by de- 
 posits, and by the payment of promissory notes. 
 
 The shopkeeper and the mechanic collect their small sums together, 
 till they get sufficient to make a deposit, or to pay a note. In these col- 
 lected sums, they have the bills of a variety of Banks. Accordingly, 
 where there are a number of Banks in good repute, one Bank receives in 
 deposit, or in payment of notes, the bills of several other Banks ; Bank 
 A, receiving the bills of Banks B, C, D, E, &c., and the other Banks 
 receive the bills of Bank A. Each Bank enjoying the benefit of the 
 interest derived from the circulation of its bills, while they are in posses- 
 sion of the other Banks, as much as if they were in the pockets of those 
 to whom the money was originally lent. 
 
 If, however, Bank A, receive more of the bills of Bank B, than B re- 
 ceives of A's bills, the balance of the advantage on this item, is against A, 
 and if A continue to receive and retain more of the bills of each of the 
 other Banks, than they have of A's bills, these last may be comparatively 
 crowded out of circulation ; in which case, Bank A loses the interest on 
 that portion of circulation upon which it depends for paying the expenses 
 of the institution ; A's bills being in time all brought in, while it continues 
 
24 
 
 to hold the bills of other Banks, from the circulation of which they reap 
 the benefit. Hence, independent of any want of confidence, it becomes 
 the interest of each Bank, to balance its accounts with the other Banks 
 
 A, sending back B's bills, and receiving its own in exchange, and requiring 
 the difference, if any, to be paid in specie ; and so with the others. Thus, 
 as a mere matter of interest, the Banks, as far as practicable, check each 
 other ; and this of course, much more, where there is a want of confidence. 
 
 This check, however, dictated by interest and prudence, is not always 
 practicable. Where there are a number of Banks in the immediate vicin- 
 ity of each other, it may not be necessary for each to call upon the other 
 .for its balance in specie, because what B may owe A, C may again owe 
 
 B, and A may owe C ; so that by passing checks, or orders, one on the 
 other, the difference may be finally adjusted, with a very small payment in 
 hard money. 
 
 If all the Banks, too, be within a convenient distance of each other, as 
 they are in cities, this balancing of accounts is very easily performed, and 
 may be effected every day. Then, daily checking each other, neither will 
 go to any great excess in its issues, unless circumstances are such as to 
 induce all of them to adopt a system of indulgence ; in which case, they 
 may all exceed their proper limits, charging each other interest on balances 
 instead of requiring immediate payment, But in proportion as Banks are 
 at a greater distance from each other, more time is required, and more 
 risk and expense incured, in effecting these exchanges. 
 
 If city Banks receive the bills of distant countr)'- Banks, whether they 
 effect this exchange themselves, or whether they do it through a person 
 who applies himself to this kind of business, they must suffer a degree of 
 loss in proportion to the time, risk and expense, already spoken of. As 
 soon, then, as the city Banks find that this loss is as great, or greater, than 
 the gain of interest made by the transactions proposed, they will refuse to 
 receive these bills. The parties having them, are then obliged to get them 
 exchanged by paying something equal to the loss of time, risk and expense, 
 alluded to. Here, then, commences the difference between the value of 
 the bills of distant Banks, and those of the city Banks. The process is 
 the same with regard to the bills of the Banks of different states. The 
 Banks of one state cannot take those of a distant state, if the loss of time, 
 risk and expense, required to exchange them, be so great as to counter- 
 balance the interest it derives from making loans. 
 
 The difference in the value of Bank bills, whether between those of the 
 city and country, or between those of one state and of another state, must 
 depend upon a variety of circumstances. The distance, the means of 
 communication, the reputation of the distant Bank, and the opportunity 
 there may be of using its bills at any intermediate point. In some cases, 
 Banks may take the bills of distant institutions at a lower rate. They may 
 collect, as it is called, on other places ; but the result is the same ; they 
 must make as much difference in the rate, as it will cost them to effect the 
 exchange ; taking the time and risk, as well as the actual expense, into 
 view. In general, a dealer in bills, or money changer, will be able to ef- 
 fect the exchange, to a limited extent, better than a State Bank ; as his 
 whole attention is applied to the business, he may have his agencies at 
 certain points, and one dealer may collect for several institutions, and in- 
 dividuals at the same time, which will make the expense fall so much 
 lighter on the whole. Whether the difference, however, be charged by 
 the Bank, or by a dealer in Bank bills, it constitutes what is called the 
 
25 
 
 rate of exchange; and whatever it may be, it is always less than it would 
 cost individuals, if every person undertook to effect the exchange of his 
 own money. 
 
 Suppose, for example, a mechanic to receive one hundred dollars in 
 bills of distant Banks a dealer in these bills may exchange them for one 
 per cent., which is one dollar only ; whereas if the mechanic undertake to 
 effect the same exchange himself, he must leave his work, he must pay 
 his travelling expenses, he must lose the interest of the money till it is 
 exchanged, and he must incur the risk of losing it on the way. If, then, 
 he have to pay this money into the Bank, his best and only course is to 
 pay the difference of exchange. So it is with every dealer or trader. 
 Whatever may be said of the loss by exchange, it is, even in the best 
 times, the unavoidable consequence of the distance and difficulty of com- 
 munication between Banks of different cities or states ; and the loss of 
 time, risk and expense, attendant on effecting these exchanges. The 
 dealers, who devote themselves to the business of exchanging paper money, 
 as far as they are able, perform a benefit to the community, and in some 
 measure mitigate the evil ; the point of enquiry, however, is whether this 
 evil may not be still more mitigated, and a still better remedy provided. 
 
 We have now seen that Banks, under the most favorable circumstances, 
 cannot receive the bills of distant institutions, when the loss incident to 
 exchanging them would be too great ; and that they cannot retain these 
 bills without losing the benefit of their own circulation. The operation 
 being the same as that of a man's paying all his own notes, without calling 
 upon others to pay the notes which he holds of theirs. Consequently, 
 however fairly and judiciously Banks may be conducted, a difference of 
 exchange in other words, a comparative depreciation in the value of 
 Bank bills must exist ; and this in proportion to the difficulties of commu- 
 nication between the several institutions from which these bills originate. 
 
 Let us now suppose that some Banks are not so well conducted as oth- 
 ers, or rather as they should be. Some of them, for instance, cause their 
 bills to be circulated in distant parts of the country, purposely, that a con- 
 siderable period of time may elapse before they can be brought back to 
 their own Bank for specie. Some of them lend their money on doubtful 
 security, perhaps on condition that they shall be thus circulated. Some 
 venture to issue more of their bills in loans than it is prudent for them to 
 give out ; some are on the verge of insolvency, and some are actually un- 
 able to pay the notes they have out, and would be obliged to stop payment 
 if a large claim were at any time to be made upon them. The real cir- 
 cumstances of such Banks are rarely known. In some cases secrecy is 
 purposely observed : in others there may be a difficulty of obtaining intel- 
 ligence, on account of the distance, or other circumstances. In some 
 cases public suspicions may go beyond the truth ; in others it may hardly 
 anticipate the evil sufficiently. In all these cases, however, the hazard 
 of dealing in the bills is increased, or supposed to be increased. Even 
 sound institutions suffer in their reputation, in consequence of the mis- 
 management of others. Here, then, want of confidence comes in to add 
 to the difference of exchange, or depreciation of value arising from natural 
 causes. 
 
 There is, therefore, ample foundation for a considerable difference be- 
 tween the value of the bills even of Banks of the same state, where all 
 the institutions are under the same state government, and where the great- 
 est distance between any of them does not exceed two or three hundred 
 
 4 
 
26 
 
 miles. How much greater must be this depreciation where the compara- 
 tive value of the bills of Banks of twenty -six different states, under dis- 
 tinct governments, subject to different regulations, and some of them 1500 
 or 2000 miles apart from the others. 
 
 How much greater must be the difficulty here, in effecting frequent ex- 
 changes ; in bringing home to each Bank the excess of its bills in circu- 
 lation ; and of judging of all the uncertainties attending the exchanging of 
 its paper. If the difference between the value of the bills of different 
 banks, and between the circumstances of different sections of the country, 
 were always the same, the inconvenience would not be so great. But so 
 long as the exchange of bills cannot be effected rapidly, there must be a 
 corresponding uncertainty as to what may take place, between the time 
 when a bill is received, and the time when it may be exchanged for spe- 
 cie, or the value of specie. This is the case even in cash transactions ; 
 how much more must it be so where sales are effected on credit. A mer- 
 chant in the city of New York, selling to a merchant in Buffalo, at six 
 months' credit, not merely taking the risk of the difference between Buffalo 
 money and city money at the time of sale, but also the risk of what it may 
 be six months afterwards ; and another selling to a merchant in Georgia or 
 Alabama, whatever the loss in exchange may be at the time, hazarding the 
 still greater depreciation to be apprehended when his sale becomes due. 
 
 We see, then, that in proportion to the relative excess in the expansion 
 of Bank issues, from the moment that one Bank cannot take the bills of 
 another Bank, there will be a corresponding difference of exchange, and a 
 comparative depreciation of currency. 
 
 SECTION VL 
 
 Effects of a Depreciation of the Currency. 
 
 Having noticed the causes unavoidably producing a difference, or de- 
 preciation in the comparative value of Bank bills, let us now observe upon 
 whom, and upon what, the consequence of such depreciation falls. 
 
 Whatever be the cost of exchanging money, it must eventually be paid 
 by the consumer. He has to pay at last for the loss of time, the expense, 
 the actual hazard, and the supposed hazard, or apprehension of hazard, 
 incured in all the money transactions connected with the purchase of the 
 goods he consumes. The New York merchant, in selling to the Buffalo 
 or Alabama merchant, must sell at a price sufficient to cover all the loss 
 he incurs, or is apprehensive of incuring, from the depreciation of the 
 money he receives, or is to receive, in payment for his merchandise. Or, 
 if the Buffalo or Alabama merchant pay for his purchases in hard money, 
 he must be compensated for the same cost arid hazard. If the danger 
 apprehended be not so great as was supposed, the intermediate trader, 
 having taken the risk, may gain by it ; but the consumer has to pay not 
 only for the real, but for the supposed, hazard. The consumer, in fine, 
 sustains the burthen of all want of confidence, as well as every other 
 charge, intervening between the producer of the goods and himself. At 
 the same time, the seller of goods, and even the money changer, may lose 
 more than he anticipates. If a depreciated currency be stationary, the 
 evil is not so great, but all must suffer inconvenience from the instability 
 
27 
 
 of a continually depreciating currency ; and this inconvenience must at 
 last be paid for in the price of every article of necessity, comfort or 
 luxury. 
 
 Add to this, in what may be called the home circulation, the mechanic, 
 fanner, and laborer, suffer most from this depreciation of Bank paper. 
 Wherever a difference in the value of Bank bills exist, there will be two 
 currencies ; one that of bankable money, as it is called, and the other of 
 that which is not bankable. The latter, as we well know, although not 
 receivable at the Bank, will be applied to almost all other payments : that 
 is, within a certain limit of depreciation. In many cases, the best Bank 
 bills will be exchanged for those of an inferior character, expressly for 
 the purpose of paying debts not due to a Bank. As a general practice, 
 we find that, whenever the bills of distant solvent Banks can be procured 
 at a cheaper rate than the bills of nearer Banks, the worst bills, or what 
 we call the out of town bills, will take the place of the best bills ; and 
 will generally be used in payment of the laboring classes. The shop- 
 keeper t the butcher, and the baker, can compensate themselves for the 
 loss on these bills, by adding to the price of what they sell ; but the la- 
 borer cannot raise the price of his day's work, to meet the depreciation of 
 the paper dollar with which he is paid ; although he experiences the effect 
 of this depreciation in the price of every article of food or clothing of which 
 he stands in need. While, then, the whole body of the community have 
 an interest, as consumers, in maintaining the stability and uniformity of 
 the currency, the laboring classes have a double interest in attaining the 
 same object. 
 
 There being, under the circumstances supposed, two kinds of money in 
 circulation one which the Banks will receive, and one which they will 
 not receive it follows, that all of the description not so received, will re- 
 main in the pockets, trunks or drawers, of those to whom it belongs, as so 
 much idle capital. It will be, in this respect, with regard to this kind of 
 money, as if there were no Banks. The amount of deposits in the Banks 
 will be so much less, and so much power in capital will be lost. Hence, 
 the greater the abundance of money in circulation not bankable, the greater 
 may be the complaints of the scarcity of money in trade : and hence an 
 interest which every community has in equalizing the currency. For if all 
 money be bankable, all except what is wanted for daily use, will be depo- 
 sited ; and the greater the amount of bank deposits, the more money these 
 institutions will h'ave to lend out, and the more real capital will be brought 
 into activity. 
 
 The circulation, therefore, of bills of distant Banks, in any city or town 
 where these bills cannot be taken by the Banks of that place, diminishes 
 its trading capital in two ways : First, by depriving these Banks of such 
 a proportion of their means as might be derived from the circulation of 
 their own bills ; and secondly, by reducing the average amount of their 
 deposits. It may be said, indeed, that all Banks may take the same liberty ; 
 that the Banks of the East may circulate their bills at the West, and those 
 of the West do the same at the East ; and so with the Banks of the North 
 and South. But this mutual invasion of each other's territory, as far as 
 deposits are concerned, increases the mischief, as it places in each district 
 so much undepo sit able money, in the place of that which might have been 
 deposited. And these efforts at distant circulation are always of the sche- 
 ming order, and especially to be discountenanced ; they are indications of 
 weakness, and grounds of distrust ; they must result in a depreciation of 
 
28 
 
 the bills circulated, and in augmenting that instability of the currency 
 against which it is so desirable to provide. Any arrangement, then, tend- 
 ing to keep the bills of all Banking Institutions within their respestive vi- 
 cinities, must, in its operation, be most unquestionably equitable, and best 
 calculated to promote and to secure the convenience and prosperity of the 
 public. Such an arrangement gives to each institution all its just rights 
 and privileges, while it guaranties to those well and properly conducted, 
 the benefit to be derived from that public confidence to which they are 
 entitled. 
 
 Such being the consequences of a depreciated paper currency, as far as 
 the general welfare is effected by them, particularly in their bearing upon 
 the consumer, and upon the laboring classes, and upon the amount of 
 available capital let us now look at the operation of such a state of the 
 currency, in the collection of the public revenue. 
 
 We have seen the tendency to increase, in the issues of all bank pa- 
 per, if unchecked, even when the banks themselves are well conducted, 
 and still more when they are badly managed. We have seen the una- 
 voidable difference in the value of bank bills, arising from the loss of time, 
 expense, and hazard incident to exchanging them, and we have seen how 
 much this difference may be increased by any knowledge, or suspicion, 
 of mismanagement on the part of those who conduct these corporations ; 
 not only, too, suspicions of what may have occured, but apprehensions of 
 what may occur at some future period. 
 
 From what has been stated, it is evident that in an extensive country, 
 like that of the United States, with twenty-six independent state govern- 
 ments, the circumstances occasioning a difference in the comparative val- 
 ue of bank bills, may vary essentially in different sections, and in different 
 states. The rate of depreciation in bills of these sections and states, of 
 course will vary according to these circumstances ; especially as in those 
 sections of the country in which capital is most wanted, there will be the 
 greatest tendency to excessive issues, and of course less of this tendency 
 in sections where capital is more abundant. Accordingly, in one section, 
 the bank paper dollar may be equal to a hard dollar ; in another it may 
 not be equal to more than ninety-five, ninety-six or ninety-seven cents 
 hard money. In other sections, it may be as low as ninety cents ; and 
 if we suppose the banking business of any particular section to be very 
 loosely conducted, the bills of that part of the country may not be worth 
 more than seventy-five or eighty cents in specie. 
 
 Now suppose one citizen imports goods in a section of the country 
 where the bank bills are equal to specie. He pays duties on these goods 
 at the rate of one hundred cents the dollar, hard money. Suppose anoth- 
 er to import the same goods in a district where the paper money is only 
 equal to ninety-five or ninety cents hard money. Here, this last citizen 
 pays five or ten per cent, less duty than the other. So, if one purchase 
 public lands, to pay, as in the first case, bank bills equal to specie, and 
 another, in another state, pay for his lands in bills worth only ninety cents 
 in specie, the citizen of one state would not pay so much for the public 
 lands, as the citizen of another. In these cases, although the duty, 
 and price, be nominally the same, the citizens of different sections 
 actually pay different rates. One indeed may be able, for this reason 
 alone, to sell the same kind of goods, or the same lands, at a profit, when 
 another could not do it without loss. This mode of collecting the revenue, 
 it is evident, is unequal and unfair. Not only so ; it is expressly in vio- 
 
29 
 
 lation of a provision of the national constitution, which requires that " all 
 duties, imports, and excises, shall be uniform throughout the United 
 States." 
 
 The unavoidable tendency, then, of the issues of all State Banks, 
 throughout the Union, if unchecked, is to produce unequal values of bank 
 paper, in different sections of the country ; and the unavoidable conse- 
 quence of these unequal values, must be, that the public burthens, if 
 payment be collected in bank bills, will not be uniform throughout the 
 several states. 
 
 It follows, then, that the national government must either collect all its 
 dues in hard money, or else it must establish some institution, by the 
 operation of which all the issues of the various State Banks will be so 
 checked, that their bills in every section of the country will be of the 
 same value that is, will be always at the par of specie, or within a very 
 small fraction of it. 
 
 If there be no such institution, as the provision of the constitution, as well 
 as the plain principles of equity, cannot be violated. The government must 
 collect its dues in hard money, or the full value thereof. It cannot receive 
 bills of Banks not worth one hundred cents to the dollar in specie, for the 
 reason already given, nor, if this reason were set aside, could it receive 
 depreciated paper money, and suffer the country to lose the difference be- 
 tween the value of that paper, and that of gold or silver. If it receive its 
 dues in specie, or the full value thereof, it must also pay out specie or the 
 value thereof. The consequence must be then, that, if all the receipts 
 and payments of the government be in specie, there will be so much less 
 amount of Bank bills in circulation, at least in all those portions of the 
 country where these bills are not equal to the par of hard money. Thence 
 results a loss to the country of so much power in capital. 
 
 We have seen that every dollar of Bank money represents, or should 
 represent a hard dollar, which is left in the Bank in lieu of it, and that this 
 hard dollar is so much capital which the Bank has the faculty of lending out 
 for the purposes of trade. Of course every paper dollar received, and paid 
 by the government, saves the use of a hard dollar, the same as in the 
 transactions of individuals. If the whole amount of the money received 
 and paid by the government, be in Bank bills, then the use of this amount 
 in hard money is saved, leaving it in the possession of the Banks, to be 
 lent out as capital. 
 
 If on the contrary, the government resort to a system of receipts and 
 payments, in hard money only, it withdraws from circulation, an amount 
 of Bank bills equal to the average amount of these receipts and payments 
 as they are continually going on, requiring from the Banks the same 
 amount in specie : perhaps several millions of dollars. But whether 
 more or less, in the mode described, crippling the Banks, at the mo- 
 ment of the withdrawal, and so long as the system continues, depriving 
 the country of the use of the capital to be derived from what may be call- 
 ed the government portion of the circulation : a disadvantage, too, suffered 
 most in those sections where the want of capital is most experienced. 
 
 This is not all, as the dues of government cannot be collected in Bank 
 bills on account of their depreciation, so neither can they be mixed, after 
 collection, with this kind of money. The government agents cannot de- 
 posit hard money in a bank, and take out bills of less value than the hard 
 money, without actually conniving at a fraud. Hence, in those sections 
 where every Bank dollar is not worth its face in specie, the money of 
 
30 
 
 government would be kept separate from the money of the Banks. The 
 Banks then can no longer enjoy any advantage from government depo- 
 sits ; and consequently the country loses all that power in capital, to be 
 derived from the use of these deposits, when, through a Bank, or Banks, 
 they are lent for the purposes of trade. 
 
 We have seen that the various sums deposited by individuals, in the 
 Banks, constitute an average amount, to be applied by the Banks on their 
 own responsibility, to the wants of borrowers. So the average amount of 
 public deposits, if in Bank, constitute a capital of some millions, in like 
 manner, to be discounted upon for the benefit of the trading community, 
 the whole capital of the Bank being held responsible to the government 
 for the amount thus loaned. 
 
 Suppose all the individuals of any given section of the country, to with- 
 draw their deposits from the Banks, we may easily conceive how much 
 the power of those Banks to aid their customers, must be diminished. 
 The operation will be the same if the government, instead of leaving its 
 money in a way to be loaned out, lock it up in safes and vaults in specie, 
 such, however, must be the unavoidable consequence of the depreciation 
 of bank bills, and of the instability of a paper currency. Wherever these 
 exist, the revenue cannot be fairly and safely collected and preserved, 
 without an entire separation of the public moneys from those employed in 
 the ordinary transactions of business. 
 
 Nor will this precaution be confined to the money operations of govern- 
 ment alone. No one will put a quantity of silver and gold into a Bank to 
 receive in return bills, not capable of commanding an equal quantity of 
 hard money. When bank bills are considerably below par, every indi- 
 vidual, as we have noticed in speaking of two currencies, keeps his silver 
 and gold in his own possession, withdrawing so much real capital from 
 the purposes of trade. In other words, silver and gold, as is well known, 
 is hoarded and secreted in proportion as public confidence in bank paper is 
 shaken. 
 
 On the same principle, in a country where the currency is unstable and 
 depreciated no foreign capital will remain. The merchant or banker of 
 Europe, dare not allow his money to remain in America in dollars and 
 cents of account, if he fear that the dollar of to-morrow will not be worth 
 so much as the dollar of to-day. He may send his goods here to be 
 sold, but he will not allow the amount to remain, he gets it home as soon 
 as he can. He can leave nothing in American money that is, repre- 
 sented by Bank money : for he says, " the currency of that country is 
 growing worse and worse." 
 
 Even the American merchant himself feels the panic. He will not 
 keep his capital at home, in any thing represented by the currency of his 
 own country. So long as the Bank currency around him is depreciating, and 
 continually depreciating, he places his funds elsewhere, if it be only for 
 safe keeping. 
 
 Thus, with loss of confidence in bank paper, real capital takes flight 
 in all directions ; and the evil is continually augmenting itself. 
 
 To supply the absence of real capital, fictitious capital is created. 
 Banks, in some instances, borrow that which is real, but they give their 
 own doubtful obligations in exchange ; and the evil consequences of the 
 fiction is thus shifted from one shoulder to another. In other instances, 
 they may borrow, as they say, only the credit of the state, in exchange for 
 the same kind of obligations; but the citizens find when it is too late, that they 
 
31 
 
 must furnish, in the shape of taxes, the real capital which the State has 
 obliged itself to give away in payment for the fictitious capital thus impo- 
 sed upon it. 
 
 Here, then are the consequences of an unstable and depreciated state 
 of Bank currency. The consumer suffers in the increased price of every 
 article he purchases. The laboring classes suffer yet more by their ina- 
 bility to raise the price of labor, in proportion to the rise in price of articles 
 of consumption. The revenue must be collected and preserved in hard 
 money, causing a loss of power in the use of the capital to be drawn from 
 government deposits and government circulation. Private citizens with- 
 draw their hard money from the Banks, and consequently from the purpo- 
 ses of trade. Foreigners also withdraw their capital from the country, 
 and even the capitalist at home, places his funds abroad for safe keeping. 
 Fictitious capital is substituted for real. State credit is brought in to sus- 
 tain this fictitious capital ; and the citizen at last is obliged to furnish in 
 the shape of taxes, the real capital, for which, this State credit has been 
 pledged in exchange for what eventually proves itself valueless.* 
 
 PART SECOND. 
 
 THE REMEDY. 
 
 SECTION I. 
 
 Advantages of a National Bank. 
 
 We have now had before us the use, and the abuse, of what is com- 
 monly called the Banking System of the United States. That is, the 
 operation of the Banks of the several states, without any reference to their 
 connection with a national institution. 
 
 On the one hand, we have the important advantages derived from the 
 immense amount of real capital, brought into activity through the instru- 
 mentality of the stocks, the deposits, and the circulation of the local or 
 
 * To this we may add the effect of fictitious capital upon the demand lor labor. 
 If A can create fifty dollars worth of fictitious capital, answering his purpose as 
 well as so much real capital, without employing labor, he will do it. Hence, the 
 more easily such capital is created, the \esslabor may be in request. Hence too, an 
 increase of prices, arising from a depreciation in the currency, may be attended 
 with a diminution in the demand for laborers, and want of employment may be 
 most felt by the industrious classes,at the very moment when speculation is most rife 
 amongst those who have the command of fictitious means. Pay day too must come, 
 A will have his notes to pay; or if he escape, the fictitious capital he has passed 
 into other hands, must at last be tested ; when perhaps parties entirely innocent will 
 suffer from his imprudence. So, in a country where fifty, or one hundred millions 
 of fictitious capital has been created, pay day must at last come. The test will be 
 applied to every thing bearing the name of capital, and millions of individuals 
 may then suffer the effects of that collapse in the price of every article which brings 
 it back to its original labor value. 
 
32 
 
 State Banks : on the other hand, we have the evils of a depreciated and 
 unstable currency, resulting from the unrestricted and irregular issues of 
 these Banks. 
 
 Are we to reject the advantages on account of the evils with which 
 they are attended, or, shall we find a remedy for these evils, and retain all 
 the advantages ? The latter course is certainly the dictate of common 
 sense, nor is it a difficult course to be pursued. 
 
 The evils in question, arising as we have seen, altogether from unre- 
 stricted and irregular issues of Bank paper, nothing more, evidently, is 
 requisite than the establishment of an institution by the operation of which 
 throughout the country, these issues must necessarily be restricted and 
 regulated. Such an institution is a NATIONAL BANK. A National Bank, 
 in the common acceptation of the term. That is, a Bank of discount and 
 deposit, chartered by the National Government, with branches in the 
 several states. Such a Bank in fine, as those of which the country has 
 already experienced the benefit at different times, for more than forty years 
 of its political existence. 
 
 Experience already warrants the assertion, that this is the remedy re- 
 quired : but in order to be better satisfied on this point, let us examine into 
 the nature and tendency of its operations. 
 
 1st. A National Bank of discount, by confining each of the local Banks 
 to its proper specie paying limit, preserves to the country the usefulness 
 of these institutions : while it provides against the introduction of ficti- 
 tious capital ; and checks that tendency to extravagant issues, which is 
 the cause of depreciation and instability in a paper currency. 
 
 2d. A National Bank, operating through its branches, diminishes 
 the time, risk, and expense, incident to exchanges of Bank paper, 
 and to the transmission of funds from one portion of the country to 
 another : thus reducing the rate of exchange between distant States to the 
 lowest possible point. 
 
 3d. A National Bank, furnishing the government with a suitable trea- 
 sury agent, for the receipt, disbursement, and safe keeping of the public 
 moneys, provides by its whole capital, for the security of these funds ; with- 
 out depriving the community of the trading capital to be derived from a 
 judicious use of the government deposits, and of the government portion 
 of the circulation ; and without affording room for the exercise of favor- 
 itism, or corrupt influence, on the part of any public officers. 
 
 4th. A National Bank, by the privileges of its charter, and by the 
 confidence it affords in the general stability of our Banking System, allures 
 real capital from abroad, and brings it from its lurking places at home : 
 directly, through its own stock ; and indirectly, through the stocks of other 
 moneyed institutions : at the same time preventing that withdrawal of such 
 capital from the country, which must otherwise result from apprehensions 
 of a continued depreciation of the currency. 
 
 5th. A National Bank, by restoring the Bank paper of the several states 
 to a specie basis, by equalizing the exchanges, by providing a safe 
 treasury agent, and by precluding the necessity of introducing fictitious 
 in the place of real capital, must render any separation of the public mo- 
 neys from those of the community unnecessary ; while it enables the go- 
 vernment to collect its dues in all sections of the country in the same cur- 
 rency, without resorting to hard money requisitions ; so far providing, in 
 the safest and most beneficial manner, for the equalization of the public 
 burthens, in conformity to the express provision of the constitution to that 
 effect. 
 
33 
 SECTION II. 
 
 Its operation upon the Local Banks. 
 
 A National Bank of discount operates upon the currency, in proportion 
 to the magnitude of its transactions, by paying out in the first instance its 
 own sound currency, whether paper, or specie, and requiring in return all 
 its dues to be paid either in specie or in bills of other Banks equal to 
 specie. If the Banks have but little to loan out, it must have little to re- 
 ceive back, and of course the effect of its operations must be small. If 
 the Bank act merely as an agent in collecting the public moneys, its influ- 
 ence on the currency will be no more than that of the collectors of cus- 
 toms, or other government agents, in its place. The result would simply 
 be, that public dues must be paid in specie, as an exception to the general 
 rule ; while all other transactions of the community would be effected in 
 the ordinary currency. The government may do as much as this with- 
 out the intervention of a Bank : and even more readily, as it may enforce 
 its own regulations. But whatever regulations the Bank may adopt, be- 
 yond its agency for the government, it must make it the interest of its cus- 
 tomers to observe them. 
 
 The Bank for example, lends out its sound currency upon express con- 
 dition, that the amount shall be repaid in like sound currency. No one is 
 obliged to borrow on these conditions, but if he does borrow, he will con- 
 form to them, because it is his interest to do so. The Bank will not re- 
 ceive deposits except in specie, or Bank bills equal to specie ; it cannot 
 oblige persons to make deposits, but those who do this, do it because it 
 is their interest to conform to the regulation. No one complains of the 
 regulation however. It is perfectly fair. We may suppose there are two 
 currencies in the country, the sound, and the unsound. The Bank deter- 
 mines to deal only in the first, and requires that what it receives should be 
 equal to what it gives out ; and engages that what it gives out shall be 
 equal to what it receives. The only question then with a customer is, 
 whether it is his interest to deal with the institution on these terms. 
 
 The Bank has money to lend, and like all other Banks, it lends in pre- 
 ference to those, who make deposits with it, that is, its depositors or 
 customers, and, as with all other banks, those who keep the best account, 
 or have the largest average amount of deposits in Bank have the best 
 chance as borrowers. It becomes the interest then of all, who have oc- 
 casion to borrow money, to conform to the regulation of the Bank, and to 
 keep as good an account with it in specie, or in specie bills, as they can. 
 
 Suppose such a Bank as this to be in a city where the other Banks do 
 not pay specie for their bills. No one who has specie will deposit it in 
 these Banks. He has hitherto kept it in his house, or in some secret 
 place ; now he deposits it in the new Bank, the bills of which he takes 
 out when he wants the money, instead of specie. 5UI the specie coming 
 in from different quarters, takes its place also in the same way in the new 
 Bank. There are certain persons who expect to have bonds to pay 
 who will require a loan from the Bank to help them. These persons open 
 an account at the Bank, others look forward to loans soon to be required for 
 different purposes. Each one withdraws his money from Banks which 
 do not pay their bills in specie, obtains the silver and gold at some loss, 
 
 5 
 
34 
 
 and deposits the amount in the new Bank. He determines at the same 
 time to have as little to do with the paper of the old Bank as he can. 
 There are now fairly two paper currencies in the place. But the new 
 Bank has money to lend, while the others have none. The new currency 
 is therefore more and more sought after ; while the old is more and more 
 brought back to the Banks to which it belongs. The old Banks then find- 
 ing their deposits withdrawn, their circulation returning upon them, 
 and their business closing of itself, become obliged, if able, to resume 
 specie payment. If entirely unable, they close their concern. If they 
 resume specie payments, their bills will be taken by the National Bank 
 as other specie bills. As soon as this is the case, they will again circu- 
 late as specie, and, confidence in the Bank returning, deposits will again 
 make their appearance. 
 
 It is evident that, in order to accomplish so much, a National Bank, or 
 any of its branches, must be a Bank of discount ; and it must discount 
 promissory notes, as well as bills of exchange ; for no one will keep an 
 account with a Bank where the notes he has to offer cannot be discounted. 
 If the Bank deal only in bills of exchange, its operations will have no 
 effect upon the currency of the place, even in name, the difference be- 
 tween specie bills, and those not commanding specie, being blended with 
 the different rates of exchange on other places. The paper money of the 
 place will still circulate in all payments except those made for govern- 
 ment account, and which are required in specie. Some small improve- 
 ment perhaps may take place from the sound currency given out by the 
 Bank in exchange for drafts on other places ; but its action in restoring 
 the currency, being just in proportion to the amount which it loans out, 
 and receives back, the greater its ability and disposition to discount, the 
 sooner a sound currency will take entire place of the unsound. 
 
 We have already noticed that in a region of country where none of the 
 Banks pay specie, there must be two currencies, one of hard money, and 
 the other of depreciated paper. If in this region a National Bank of 
 discount, or the branch of such a Bank be established, from that moment 
 there will be two paper currencies in the place : one equal to specie and 
 unchangeable, the other depreciated and depreciating. In the first, the 
 community will have confidence ; in the last, they will have none. The 
 continual effort of sellers therefore will be to make their contracts pay- 
 able in the first currency. For this, a corresponding difference in price 
 will be made, and all new promissory notes, acceptances, &c., will be 
 made payable at the Bank or Banks paying specie. In addition to which 
 a sound paper currency being provided in the place, and the law being on 
 the side of specie payments, those who are able to pay, will have no pre- 
 tence for offering depreciated paper, on the ground that nothing better is 
 to be procured. From this time, the character of the currency in this re- 
 gion is restored, a few bills of suspended Banks may be in circulation, 
 but the difference between these, and those payable in specie, will be so 
 great that their number must be daily less and less. The reputed cur- 
 rency of the place will now be that of Bank paper equal to specie. 
 
 This effect being produced by the loans, more especially of a National 
 Bank of discount, it is evident that in order that the same effect may be 
 brought about throughout all the United States, there must be a similar 
 Bank or branch of a similar Bank in each of the states in the union. In 
 states where all the Banks pay specie, the presence of such a Branch 
 may not be needed for the restoration of the currency in that quarter ; but 
 
in any of those states, or sections where the Banks do not pay specie, 
 without such a Bank or branch, the currency will remain depreciated, al- 
 though in all others where there are branches it rnay be restored. It is 
 easy to suppose that Banks, having suspended specie payments, but still 
 deriving a profit from the circulation of their bills, may oppose the estab- 
 lishment of a National Branch in their quarter. They will oppose it for 
 the very reason, that it will introduce a currency better than their own ; 
 and we may suppose these Banks to have sufficient influence with their 
 respective legislatures to prevent the reception of such a Branch into the 
 state, if its establishment be optional with the state. It follows therefore 
 that a National Bank, in order to bring about a uniform restoration of the 
 currency throughout the country, must not only be a Bank of discount 
 with branches, but it must have power to establish branches in different 
 states, wherever the presence of such a Bank may be requisite for the end 
 in view. Without the power of discounting, the Bank cannot act effectu- 
 ally upon the currency : without branches it cannot act in different quar- 
 ters of the country ; and without the power to establish branches wher- 
 ever the state of the currency may require it, the restoration of that which 
 is most depreciated may be prevented, and the great object of establish- 
 ing a uniform currency defeated. 
 
 If on the one hand, some Banks, too far gone to be resuscitated, find 
 the operation of a National Bank inconvenient, by its tending to bring 
 their affairs to a close ; on the other hand, many Banks, less embarassed, 
 may find a relief where they least expected it. Some of the local Banks 
 have become crippled in their means, by lending their money either to 
 their own states, or upon state securities. We may suppose these loans 
 to be eventually good, but the money cannot be called in so as to enable 
 these Banks to apply it to the payment of their own notes. Here we 
 may suppose a National Bank, with anew and ample capital, and with its 
 peculiar resources, capable and disposed to furnish precisely such assist- 
 ance as the case requires. That is, it lends to these Banks on their own 
 credit, together with the security of the same State Stocks, a sufficient 
 amount in specie, or its equivalent to enable each of them to meet its bills 
 in gold and silver, and thus to do at once, what otherwise it might not be 
 able to accomplish in many years. 
 
 We may now consider the currency restored, and suppose a community 
 in which all the Banks pay specie for their bills. How do the operations 
 of a National Bank confine the other Banks to their proper specie paying 
 limits, so that they may not place themselves in the position of being 
 obliged again to suspend payment ? 
 
 We have noticed the dispositions of all Banks to extend themselves, 
 unless there be some obstacle to prevent it. We have seen, too, in what 
 manner a number of Banks, within a convenient distance of each other 
 may check each others circulation ; and we have seen that under these 
 circumstances no Bank can go beyond its proper limit, without the indul- 
 gence of others. Of course it is only by an agreement for mutual accommo- 
 dation that all these Banks, within a given vicinity, can allow themselves 
 any such indulgence. We have seen how such an agreement rnay originate, 
 each institution being fearful of pressing its neighbor, and of thus bring- 
 ing about a general pressure, affecting its own debtors ; jeopardizing the 
 safety of its own loans, as well as endangering the individual interests 
 of its own directors or conductors. Hence the disposition amongst the 
 Banks of any single state, to sustain each other in a system of postponing 
 
36 
 
 the payment of their bills in hard money. The creditor Banks being 
 satisfied by receiving interest on their balances from the debtor Banks. In 
 such a state of things, there is but one obstacle to a suspension of specie 
 payments, which is the penalty of a forfeiture of their charters. This 
 penalty, however, is a matter of state regulation. If the Banks of the 
 state be able to procure indulgence from their own state governments, they 
 have nothing to fear from other quarters. 
 
 If Banks are embarrassed, it is because their debtors cannot pay them. 
 If all the Banks of any particular state, or section, are obliged to suspend 
 payment, it is because their debtors are so much embarrassed as to be 
 unable to pay. We have only then to suppose the embarrassed debtors, 
 of all the Banks of a state, to form a class sufficiently powerful and nu- 
 merous, to influence a popular election, and we may be assured that their 
 views will become the views of their representatives. These persons 
 will desire indulgence for the Banks, in order that the Banks may indulge 
 them, their will becomes the will of their representatives. The indul- 
 gence to the Banks is granted, and the only obstacle to a general suspen- 
 sion of payment on the part of these Banks is removed. A special law 
 sanctions the measure, and its continuance becomes popular, because the 
 number and influence of Bank debtors make it so. 
 
 How is it now with the Branch of a National Bank, under similar cir- 
 cumstances ; supposing one to be established ? Such a Branch receives 
 daily the bills of the other Banks, as well as of its own, in payment of 
 notes and drafts on deposit. The other Banks receive also the bills of 
 the Branch in common with their own. Daily, or weekly, the Branch 
 balances its accounts with the other Banks, and whatever difference there 
 may be in its favor, the same must be paid in silver or gold. This pro- 
 ceeding, regular and inevitable as it must be, probably will prevent the state 
 Banks, each from going beyond its respective limits, hence the question 
 of indulgence as in the previous case, may never arise. But suppose all 
 the Banks of this state, to have so extended themselves as to incline them 
 to agree upon a plan of not calling upon each other for balances in specie. 
 They apply to the Branch Bank to come into the measure. Here, what- 
 ever be the disposition of the directors and officers of this Branch, they 
 cannot come in. They are merely directors of a Branch. They can 
 only refer the matter to the Parent Board. The Branch has also its bal- 
 ances to settle with other Branches, and those other Branches have bal- 
 ances to settle with other state Banks. Beyond a certain limit of ac- 
 commodation therefore the Branch cannot go. It must pursue its regular 
 routine of paying specie for the notes of its own Bank ; and requiring 
 specie for the notes of all others ; or, suppose the matter referred to the Pa- 
 rent Board, that Board cannot refuse specie payments itself, neither can it 
 authorise one of its Branches to refuse such payments ; still less can it 
 authorise one of its Branches to receive the notes of other Banks, with- 
 out calling on them for specie ; while it continues to pay specie itself. 
 The course of the National Bank, must be such as is adapted to uniform 
 action throughout the whole of the twenty-six states. It cannot make 
 an exception in one state, which would give that state a preference over 
 others. 
 
 Here again these circumstances alone, may pevent matters from going 
 further. The state Banks finding themselves obliged to pay specie, re- 
 strict their issues, make some unusual efforts to supply themselves with 
 silver and gold, and save themselves before it is too late? 
 
37 
 
 But suppose the general embarrassment to be so great amongst the debt- 
 ors of the state Banks, and even of those of the Branch, that a suspen- 
 sion of specie payments is called for, by the popular voice of that whole 
 section of country. This popular voice furnishing an assurance to the 
 state Banks, that their charters will not be forfeited by suspension ; the 
 argument avails nothing with the Branch Bank or with its Parent Board. 
 The National Bank has another source of authority to look up to. It de- 
 rives its power from the national government, and it must have the assu- 
 rance that the majority of the representatives of twenty six different states, 
 together with the executive magistrate for the time being, will authorise 
 its refusing to pay its bills in hard money, before it can come into any 
 measure of the kind, in any part of the country. 
 
 Such a case cannot be supposed. Nothing but the utmost punctuality 
 in its payments can enable a National Bank to sustain itself, or to procure 
 the protection of the national government at any time. Its very charac- 
 ter and position exposes it to every possible accusation, to be grounded on 
 any irregularity in its proceedings ; and such, it is desirable for the pub- 
 lic good, should be the case. 
 
 A National Bank therefore, from its organization, from its accountability 
 to the national government, and from its peculiar dependence upon a pre- 
 cise conformity to the provisions of its charter, must act as a check upon 
 the operations of other Banks, in a way not to be compromised. This 
 action too must be uniform throughout the country, because what we have 
 predicated of one Branch, may be equally so of all, or of any of the others. 
 If we suppose a Branch of the National Bank to be located in each of the 
 twenty-six states, each Branch must operate in the manner supposed upon 
 the local Banks in its neighborhood. No Branch can suspend payment 
 itself, or admit of the suspension of other Banks dealing within it, with- 
 out authority from the Parent Board ; and this Parent Board cannot de- 
 viate from the terms and conditions of its charter, without an act of 
 Congress ; and such an act cannot be passed without at least, a majority 
 of both houses of the National Legislature together with the consent of 
 the President. 
 
 Here then we have, in the existence of a National Bank, both the 
 means of restoring a depreciated currency, and two distinct and different 
 guaranties for the maintainance of specie payments, on the part of the local 
 Banks, where there was only one before. 
 
 SECTION III. 
 Operation of a National Bank upon the Domestic Exchanges. 
 
 Having reached a state of circumstances, in which all the Banks are 
 supposed to pay specie for their bills, we come now to inquire in what 
 manner the operations of a National Bank tend to reduce the difference 
 in the rate of exchange, between distant states, to their lowest possible 
 point. 
 
 Difference of exchange between different sections of the country, and 
 difference in the value of bank notes of those sections, it must be remem- 
 bered, are distinct subjects. 
 
 Where all Banks pay specie on demand for their paper, the bills of each 
 Bank will be at par in its respective locality. Where two Banks, in the 
 
38 
 
 same place, pay specie, there is no difference in the value of their bills ; 
 but if one Bank pay specie, and the other does not, there will be then a 
 difference in proportion to the probability of obtaining an equivalent for 
 the face of the bills of the suspending Bank. So where the Banks of one 
 section of the country pay specie, and those of another section do not, 
 there will be the same kind of difference in the value of the bills ; but this 
 is not a matter of Exchange, in the ordinary acceptation of the term. 
 
 The Banks in New Orleans, and the Banks in New York, may both 
 pay specie, and yet there will be a difference in the rate of Exchange be- 
 tween the two places. In the ordinary transactions of business, this dif- 
 ference of Exchange, which, as we shall see, cannot exceed a certain 
 rate, is not material, because the rate of Exchange is taken into consider- 
 ation and forms part of the price in the sale and purchase of goods ; but 
 as the Constitution of the United States requires the payment of all dues 
 to government to be the same in every part of the country, that the citizens 
 of one state be not obliged to sustain any greater burthen than those of 
 another, it is desirable, and it is even incumbent upon the administrators 
 of government, to adopt such measures as will tend to reduce the difference 
 of Exchange between different points, to the lowest possible rate. For 
 this purpose, as experience has shown, nothing is so well calculated as 
 the establishment of a National Bank of discount and deposit, with branch- 
 es in every state. 
 
 The difference of Exchange in contemplation, arises, in the first place, 
 from the difference in the wants of the community, in respect to funds, at 
 different periods of the year ; and in the second place, from the difficulty 
 of transmitting these funds from the place where they are least wanted, to 
 that where they are more wanted. 
 
 At certain seasons of the year, money is wanted in the city to procure 
 supplies for the country ; at other seasons, money is wanted in the country 
 to pay for the produce sent to the city. So at one season, money is 
 wanted at New Orleans to pay for the crops of cotton, sugar, tobacco, &c., 
 collected at that place ; at other seasons of the year, money is wanted at 
 New York to pay for the supplies of clothing, household stuff, &c., sent 
 to New Orleans for distribution over the south-western stales. Funds 
 cannot be kept in New York or New Orleans for a great part of the year, 
 because they will be wanted at a certain period. This would occasion a 
 loss of interest, and a loss of profit, much more important than any differ- 
 ence of Exchange, besides a great inconvenience to the parties interested. 
 These funds, therefore, must go and come as they are called for. Here, 
 then, is the first element of the difference of Exchange, and the main 
 point is to enable these funds to go and come in the cheapest, safest, and 
 most expeditious manner possible, which belongs to the next subject of 
 consideration. 
 
 The rate of Exchange depends upon three distinct items : the expense, 
 the risk, and the loss of time, incident to the transmission of funds from 
 one place to another. 
 
 The transmission of merchandize is a matter of speculation, and must 
 be confined to those who are acquainted with the trade. Bank bills, and 
 bills of Exchange, being out of the question, we suppose the funds in con- 
 templation to be transmitted in specie. Some kinds of specie, indeed, such 
 as Spanish dollars, and doubloons, are often worth more in one place than 
 they are in another, but this consideration also we set aside, belonging, as 
 it does, to matters of merchandize. 
 
39 
 
 We suppose, then, a merchant, or banker, in New York, wishing to 
 place funds in New Orleans, in the cheapest and most sure manner. He 
 sends the amount in American dollars, or eagles silver or gold of pre- 
 cisely the same value in both places. In doing this, the merchant incurs, 
 in the first place, the expense of transportation : 
 
 He pays for the freight from New York to New Orleans, l per cent. 
 He must next insure against the hazard of the sea, or take 
 
 the risk himself. 
 
 Here he pays a premium of another J " 
 
 Again, from the time he pays for his specie in New York, 
 till it goes to his credit in New Orleans, he loses the 
 interest, say for thirty days, which may be put down 
 also as another \ " 
 
 To these three certain items, may be added brokerages, 
 commissions, and other incidental charges, equal to a 
 further quarter or \ " 
 
 Thus we have the expense, risk, and loss of time, incident to transmit- 
 ing funds, in specie, from New York to New Orleans, equal to one and a 
 half or two per cent. which is the second element of Exchange, or that 
 which regulates its rate. 
 
 We now suppose the person making the remittance, to go to a dealer in 
 Exchange for a bill on New Orleans. The d.ealer, in effect, makes the 
 same calculation and names his price, including the profit which he pro- 
 poses to make in the transaction ; and taking into consideration the ad- 
 vantage he gains by having the money in New York while his bill is on 
 the way to New Orleans, and while it is coming due after it gets there ; 
 and on the other hand, considering the expense of commissions or agency, 
 to which he may be subjected at the point upon which he draws. 
 
 Where the business of Exchanges is in the hands of private dealers, 
 each having to support his own establishment upon the profit of this bu- 
 siness, it is seldom that they can afford to sell their bills so low as barely 
 to cover the expense of transmitting the amount in specie. In addition to 
 this, they have rarely a large amount to draw for in different places, for if 
 they kept such amounts lying in the hands of distant correspondents, or 
 agents, besides other hazards, they might lose more interest on their 
 money, than they gained by drawing and remitting. Such persons can 
 go only to a certain extent, and when called upon to furnish bills beyond 
 what they have actually to draw for, if they do it at all, it must be at such 
 a rate as they think will certainly cover every expense, hazard, or loss of 
 time, to which they may be subjected. 
 
 The same may be said of State Banks. If they undertake to operate 
 as dealers in Exchange, they can only do it to a limited extent ; and if 
 they employ agents, these agents must be paid. If they transmit specie, 
 they pay the same charges as other dealers. If two or more banking es- 
 tablishments interchange drafts, each establishment must support itself; 
 and each gives only a limited credit to the other. The result being finally 
 the same, that neither local Banks, nor individual dealers, can furnish bills, 
 or will be disposed to furnish bills, at a less rate than will cover the 
 freight, insurance, commissions, loss of time, &c., incident to the trans- 
 portation of hard money together with at least some profit, however 
 small, on the transaction. 
 
 We will now suppose the existence of a National Bank of discount and 
 deposit, with ample capital, and with the requisite number of branches. 
 
40 
 
 So long as such a Bank is drawing interest for all its means, it is imma- 
 terial whether this interest be drawn by one Branch or another. What- 
 ever the number of Branches, and however distant from each other they 
 may be, there is, in fact, but one concern ; and for this reason also, there 
 is the same confidence on the part of the Bank, in one Branch that there 
 is in another. So that the objections of loss of interest and want of confi- 
 dence, which might occur between distant individuals, or between distant 
 local Banks, cannot occur here. 
 
 The Branches are established in different sections of the country, prin- 
 cipally for the purpose of doing the business of the government, and of 
 gaining interest by lending or discounting money. Whether the busi- 
 ness of Exchanges, in any particular section, be a matter of importance 
 or not, the Branch must be established there. The Exchange business 
 being but a secondary and incidental object; consequently the expense of 
 maintaining the establishment hardly enters into a calculation of the rate 
 of Exchange. The Bank has the advantage of the public deposits. Its 
 bills being receivable for public dues, all over the country, it has the 
 advantage of an extended circulation, which affords also to the country a 
 supply of a certain amount of currency every where at par. It is able, 
 therefore, to conduct the business of Exchange on lower terms than any 
 other establishment, for the same reason that a line of stage coaches, paid 
 for carrying the public mail, can afford to take passengers and baggage 
 cheaper than coaches depending for their maintenance upon the carriage 
 of passengers only. 
 
 Then as to time, if, for example, the Branch at New Orleans have a 
 surplus of funds arising from bills collected, sent out by the Branch in 
 New York, that surplus may be lent out in New Orleans as well as at 
 New York, being for account and benefit of the same institution and of the 
 same stockholders. Or if the Branch in New York have a surplus arising 
 from the bills remitted from New Orleans, the interest accruing in New 
 York is for the same account. If the Branch at New Orleans be short of 
 funds, in consequence of the amount remitted to New York, it may draw 
 on some of the southern or western Branches. If the Branch at New 
 York be short, or expect to be so, it may be supplied from some of the 
 northern or eastern Branches. All of the Branches applying to the Parent 
 Board, as to a common source of information, for direction as to the em- 
 ployment of their surpluses, or as to the supplying of their wants. In this 
 way, each Branch can conveniently wait the course of trade, to receive 
 back the funds it has parted with ; while the whole country is accommo- 
 dated, and no very pressing demand for Exchange or for specie, is made 
 on any particular section. 
 
 When nooftey is wanted, for example, in New Orleans, for the purchase 
 of the southern crops, the Branch there may furnish the money, and take 
 bills at sixty or ninety days sight, on the Branch in New York. By the 
 time these bills are due, or soon afterwards, money may be wanted in 
 New York, to purchase goods for New Orleans. The New York Branch 
 then supplies the money, and takes bills on New Orleans. If these trans- 
 actions occurred between independent establishments, or dealers in Ex- 
 change, each, from want of confidence, from fear of losing interest, or 
 from desire of maintaining a high reputation for punctuality and precision, 
 might feel obliged, however inconvenient, to transmit its balances in silver 
 and gold, at the cost of so much expense, risk, and loss of time ; causing, 
 on all these occasions, a corresponding rise in the price of Exchange, or 
 
41 
 
 an increased demand for specie. Whereas, in the case supposed of a Na- 
 tional Bank, with Branches, the actual transmission of specie, in most in- 
 stances, is saved, and the difference of Exchange, if any, is brought down 
 to a mere fraction ; the result of the combined action, or arbitration of Ex- 
 changes, in the arrangement of balances of different Branches of the Bank. 
 The New York Branch, for instance, being in debt to the New Orleans 
 Branch the Baltimore Branch in debt to the New York Branch the 
 Branch at St. Louis in debt to the Branch at Baltimore the Branch at 
 Natchez to the Branch at St. Louis ; the Natchez Bank may finally be 
 called upon to pay the debt of the New York Branch, to that of New 
 Orleans. 
 
 Here, then, we see in what manner, and for what reason, a National 
 Bank is capable of reducing the various Exchanges of the country to their 
 lowest possible rate ; and certainly to a degree beyond that which can be 
 effected through any other known instrumentality ; although, in the nature 
 of things, some trifling difference in the rate of Exchange, between distant 
 sections of an extensive country, at certain periods, is unavoidable. 
 
 At the same time, the arrangement is most beneficial to the country, as 
 the large resources of the Bank enable it to furnish funds, at different 
 points, in anticipation of the crops coming in, or of goods about to be sup- 
 plied ; thereby equalizing the rates of Exchange throughout the year; or 
 at least preventing that, extreme fluctuation which must take place where 
 the transmission of funds is confined altogether to particular seasons. 
 
 SECTION IV. 
 
 Operation of a National Bank as a Fiscal Agent. 
 
 Let us now consider the operation of a National Bank, in providing for 
 the safety of the public moneys, without depriving the community of the 
 advantage of capital to be derived from the use of those moneys, either 
 while in the public Treasury, or while in the process of circulation. We 
 are to see, at the same time, how this object is obtained without allowing 
 room for the exercise of favoritism towards any particular State or Bank, 
 and without involving the exercise of government influence, either in as- 
 signing a place of deposit in the first instance, or in removing the public 
 funds, and transfering the government agency, from one institution, or in- 
 dividual, to another. 
 
 We have seen, in the case of private Banks, that the deposits of indi- 
 viduals of their surplus funds in these Banks, is a placing in the way of 
 active employment, of so much real capital otherwise remaining idle, and, 
 for the time being, out of reach. The operation is the same, with regard 
 to the public deposits. If the government keep its money in its own 
 vaults or safes, in such a way as not to admit of its being used for purposes 
 of trade, it is so much idle capital, occasioning the loss of so much power 
 in capital to the nation ; no one being benefited, either by the interest to 
 be earned, or by the profits to be gained beyond the interest, from the 
 loan of it. 
 
 Suppose the average amount of these deposits to be ten millions of dol- 
 lars, scattered throughout the twenty-six states. Here is an annual loss, 
 on ten millions of dollars, of interest and profit, which would have gone 
 
 6 
 
42 
 
 into the pockets of the people of the country, and would have enriched 
 the nation in the same degree. The wealth of the whole nation being 
 made up of the riches, or property, more or less, of every individual citi- 
 zen. Not only this : the unavoidable operation of the business of the va- 
 rious Branches of the Bank, is to bring this capital, at proper periods, into 
 all those sections of the country where it is most wanted ; like the waters 
 of some ample reservoir, by a variety of conduits, seeking every where, 
 and at all times, its proper level. 
 
 At the same time, this is without hazard to the public treasury, because 
 the whole capital of the Bank is answerable for the use made of the pub- 
 lic moneys, by each and all of its Branches. Suppose, for instance, the 
 largest amount of the public funds at any time on hand, to be ten millions 
 of dollars, and the capital stock of the Bank to be thirty or forty millions ; 
 here is a security for the public moneys, of three or four times the amount, 
 in every event at hazard. We suppose, of course, the national govern- 
 ment, in chartering a Bank, to prescribe an amount of capital amply suffi- 
 cient to secure the public revenue. 
 
 There might be, it is true, the. same active employment of this capital, 
 if the same amount of deposits were divided amongst different State Banks, 
 but the security to the country would not be equally good. Each Bank 
 would then be answerable only for its own management of the amount 
 committed to its charge. In some cases, the whole capital of such a Bank 
 may not be equal to the amount of funds over which it may gain the con- 
 trol ; and if a Bank furnish the additional security of individuals, besides 
 the difficulty of realizing any thing from the prosecution of bonds in ccses 
 of delinquency, these individuals may be the very persons who borrow 
 the money of the Bank, and if the Bank be delinquent, it is because 
 these borrowers are delinquent ; or they may be the large stockholders of 
 the institution, whose own means depend upon the condition, and whose 
 ability to respond, depends upon the solvency of the institution for which 
 they become responsible. As a general rule, wealthy individuals will not 
 become the bonds-men of a Bank, for the use of the public moneys, unless 
 they themselves are to divide this use amongst them ; in which case the 
 Bank, and its security, are one and the same thing. Besides this, how 
 difficult must it be for the officers of the Treasury department, at the seat 
 of government, to judge correctly, either of the solidity of the local Banks, 
 or of the individual security they offer, throughout all the States of the 
 Union. 
 
 With a National Bank, on the contrary, the government looks to the 
 whole capital for the security of every Branch, while it has, by charter, 
 the right of inspection and examination, and, to a certain degree, of con- 
 trol, over all its proceedings, so far, at least, as may be necessary for the 
 security of all the public funds committed to its charge. Such a provi- 
 sion, in the nature of the case, cannot exist in an equal degree, with State 
 Banks, They may agree to submit to such an investigation, but this be- 
 ing but a voluntary act, can be depended upon only so long as it is not their 
 interest to avoid a scrutiny ; being, as they must be, independent of the 
 national government, and depending only upon that of their respective 
 states for the continuance of their existence or their privileges. A Na- 
 tional Bank, on the contrary, is the creature of the national government. 
 To that it is responsible, and on that it depends ; and hence the peculiar 
 security offered by its capital. Not only that its nominal amount shall 
 be amply sufficient, but that Congress and the Executive have, at all times, 
 
43 
 
 the right to be satisfied that this security is real, available, and undimin- 
 ished. 
 
 But besides the difference of security, it is important, for the liberties 
 of the country, that there be no room for making the use of the public 
 moneys a source of government patronage. 
 
 The use of capital is a privilege equal to the grant of as much money 
 as this capital may be supposed capable of yielding, by interest or profit, 
 in the period during which its use is enjoyed. If the use of the public 
 deposits be distributed amongst the different State Banks, at the will of 
 those who administer the government, these persons will enjoy a power 
 of patronage equal to the granting of so much money as the interest and 
 profit to be derived from these deposits may be supposed to yield. If, for 
 example, the sum of six hundred thousand dollars were placed at the dis- 
 position of the President of the United States, to distribute in donations to 
 whom he pleased, every one would consider this a very dangerous power; 
 and if the President has the power of distributing the use of ten millions 
 of dollars, the simple interest of which alone for one year is six hundred 
 thousand dollars, is not the power equally dangerous ? How much more, 
 then, when we consider the anticipations of profit, in which every one in- 
 dulges, who has the proposed use of capital before him. The power to 
 influence on the one hand, and the temptation to corruption on the other, 
 being in proportion rather to the prospect, than to the certainty, of profit. 
 Banks, as mere corporate bodies, it is true, are not the subjects of tempta- 
 tion ; but it must be remembered that the public moneys distributed amongst 
 Banks, at the pleasure of a public officer, are, in fact, distributed amongst 
 the directors, customers, and stockholders, of those Banks, and it is upon 
 these that the influence of this government patronage must unavoidably 
 act. 
 
 If certain State Banks throughout the twenty-six United States, be se- 
 lected by Congress as public agents, then the halls of the national legisla- 
 ture becomes scenes of intrigue and cabal, for the division of this descrip- 
 tion of spoils ; and Senators and members of Congress will be elected ac- 
 cording as this, or that, Bank makes the most efforts in favor of the mem- 
 ber pledged to support its claims. If the selection be left to the President, 
 or to the Treasury Department, which, in effect, must be the same thing, 
 he will have so much pecuniary power put into his hands to enable him 
 to secure his own re-election ; and, if he aim at it, even to perpetuate 
 his enjoyment of office. He will give the use of this public capital to 
 such sections of the country, and to such Banks, and through them to such 
 individuals and transfer their use from one section to another, and from 
 one Bank to another, or from one set of individuals to another in such 
 way as will best promote his own views : either in punishing those who 
 do not gratify his wishes, or in rewarding, and even bribing, those most 
 officious in promoting his designs. 
 
 In the case of a National Bank, on the other hand, there is no room for 
 the process of favoritism here supposed. Such an institution is chartered 
 expressly to receive and disburse the public moneys. The use of the 
 public deposits, therefore, must be given to such a Bank by the act of in- 
 corporation, before it is known who the stockholders, directors, or officers, 
 are to be. The stock is afterwards subscribed for, and sold, in open mar- 
 ket ; and the shareholders are under no obligation to the government, or 
 to any member of the government, for the number of shares they obtain, 
 nor for any benefit they afterwards receive from these shares. The privi- 
 
44 
 
 leges of the Bank are fixed by law, and cannot be changed, except by law, 
 so long as the institution complys with all the conditions of its charter. 
 The officers, directors, and customers, are, therefore, entirely independent 
 of the administrators of government, so far as any opportunity for favorit- 
 ism or patronage is in question. The Bank receives the public deposits, 
 because the government is pledged to place them with that institution ; 
 and they cannot be removed without a breach of public faith ; still less 
 can they be transferred from one place to another, or from one set of indi- 
 viduals to another, to answer any electioneering purpose. At least, such 
 a violation of public decency must call down upon the offender an almost 
 universal sentiment of reprobation : a burst of indignation which few can- 
 didates for public favor would venture to encounter. 
 
 If, instead of leaving the public moneys in the ordinary way of deposits 
 in certain Banks, the officers of the Treasury receive from those Banks 
 their own notes, or bills, or other paper obligations, and lock them up in 
 vaults or safes, this amount, whatever it may be, is so much added to the 
 circulation of those Banks, with the assurance that it will not be brought 
 back upon them for a certain period. Here, then, is another opportunity 
 for favoritism : for if those who administer the government, may choose 
 what bank notes they will receive and lock up, and what they will refuse, 
 they have the power of giving just so much use of capital to those Banks, 
 and to those individuals, whom they wish to favor ; to which dangerous 
 influence, is to be added the hazard of so much bank paper, which may 
 prove a partial, or total, loss to the Treasury. 
 
 The direction to a public officer, to keep the funds of government out 
 of trade, and out of a Bank, will answer no purpose as security, unless he 
 keep these funds absolutely in silver and gold, in a vault by themselves ; 
 for if such an officer, having five hundred thousand dollars of the public 
 money on hand, keep the amount in certain Bank notes, of five, ten, 
 twenty, or one hundred dollars each, he trusts that Bank just as much as 
 if he took one bank note, or check, for the whole amount ; in fact, just as 
 much as if he allowed the Bank to pass the whole five hundred thousand 
 dollars to his credit, with the bare understanding that it should be forth- 
 coming when called for. 
 
 So in regard to what we have already termed the government portion 
 of the circulation. We have seen that every dollar held by the people in 
 paper, either in their shops or houses, or pockets, or as it may be passing 
 from hand to hand, leaves a dollar of real capital in the Bank, which is 
 capable of being loaned out and actively employed. The money put in 
 circulation by the agents of the government, has the same faculty, in this 
 respect, as that in the hands of private citizens. If then government offi- 
 cers, by employing certain Banks as their agents, put the bills of those 
 Banks into circulation, and keep them so, in preference to the bills of other 
 Banks, here is again an opportunity for government patronage, and another 
 means of giving the use of a certain amount of capital to certain institu- 
 tions, accompanied with the risk of the paper of these institutions, so long 
 as it may be under the direction of such government officers. 
 
 This room for patronage, both in respect to the use of capital derived 
 from the public deposits and from government circulation, can only be 
 avoided (without a National Bank) by a hard money system ; in which 
 case, as we have seen, the whole use of this capital must be lost to the 
 country. 
 
 With a National Bank, on the contrary, as in the case of the deposits 
 
45 
 
 so in that of the circulation there can be no room for favoritism. The 
 circulation obtained by a Bank, as an agent of government, is assigned to 
 it before the stockholders or conductors are known. The shareholders 
 receive the benefit of it, as a matter of law : a right for which they can be 
 under no obligation to any department of government, and a privilege of 
 which they have no reason to fear the privation. Here, there is no room 
 for bribery, or corruption, or patronage ; while the large capital of the 
 Bank affords full security for the bills held, and the Bank itself assumes 
 the hazard of the bills of all other institutions, passing through its agency 
 for account of government. At the same time, the trading capital, afforded 
 by the average amount of these deposits, and of this government circula- 
 tion, through the instrumentality of the Branches of the Bank, is diffused 
 over the whole country is beneficially felt in every channel of trade 
 and affords to the general mass of national wealth, all that increased ac- 
 cumulation which its interest or profit is capable of yielding. 
 
 SECTION V.. 
 
 Operation of a National Bank, in bringing forward a supply of Real 
 
 Capital. 
 
 We are now to consider the advantage accruing to the country from 
 the additional real capital brought,' as we may say, into market through the 
 agency of a National Bank, both at home, and from abroad ; as well from 
 subscriptions to its own stock, as from the confidence, its operations are 
 calculated to inspire in the stability of other moneyed institutions. 
 
 We have supposed, throughout these remarks, the national institution 
 required to be a Bank of discount ; because, without the power of dis- 
 counting both bills and notes in the common sense of the term, it can ef- 
 fect nothing of importance, either in restoring or regulating the currency. 
 We have supposed also, its Capital Stock, to be ample, that the several 
 Branches may discount largely and liberally, and even lend to some of the 
 Local Banks on such undoubted security as they may be able to furnish ; 
 and also to afford to the country adequate security for the amount of 
 public and private deposits, and its own issues. We must further suppose 
 that the privileges offered by the charter are such as to induce capitalists, 
 both of our own and of other countries, to invest their funds in the stock 
 of the institution. For it is idle to suppose, that the mere passing of an 
 act to incorporate a Bank, will bring forward the funds necessary to make 
 up the capital ; and perhaps the opposers of such an institution can adopt 
 no surer method, for preventing its going into operation, than that of di- 
 minishing its priviliges, and restricting its operations. 
 
 Presuming the advantages offered by the charter of a National Bank to 
 be such as to induce both American and foreign capitalists to invest their 
 money in the stock, the benefit thence accruing to the country, is that of 
 a greater competition in the business of lending money ; enabling the bor- 
 rower to obtain it more easily, and on better terms. 
 
 In all kinds of business, every man wishes to prevent others, as far as 
 possible, from coming into competition with him. If there be but one 
 person having a certain article to sell, he may ask what price he pleases. 
 If there be two, or more, there is so much probability that one will sell 
 lower than the other. The more persons there are to sell any given 
 
46 
 
 article, and the more there is of it to be sold, the sooner it will reach its 
 lowest possible price. Suppose a country where there is but one person, 
 who sells grain, no other person's grain being allowed to come into the 
 place ; the people of this country must give whatever price this seller 
 may ask. But suppose the law to be altered, and other farmers or dealers 
 in the neighborhood to be allowed to bring in their grain : if these others 
 be disposed to sell their grain lower, the price falls. This competition 
 with traders of other districts brings down the price of wheat, and bread 
 becomes so much cheaper. The first dealer, who lately sold at such high 
 prices is very much vexed, no doubt, at the change ; and supposing him 
 to be a farmer, if he hired his farm, and cannot now give as much rent as 
 he did before, his landlord is as much vexed as he is ; but the people of 
 the place have every reason to be satisfied, for the new competition hav- 
 ing cheapened the article of bread, every one is able to live so much the 
 better for it. 
 
 The operation is the same with capital. If there be but one person in 
 a place, having money to lend, he will demand what rate of interest he 
 pleases. If there be several persons to lend, some will sooner or later 
 take less interest than others, rather than incur the risk of having their 
 money lie idle. The more lenders of money there are, the lower must be 
 the rate of interest. 
 
 Suppose a country where there is only a certain set of persons, and a 
 certain number of institutions having the power to lend money. These 
 lenders finding out by experience how much their capital is wanted, and 
 knowing the certainty of lending it at a particular rate, may agree together 
 not to lend below that rate. Some may demand more, but none will ask 
 less, and so long as all that is to be lent, can be lent at the rate supposed, 
 these lenders have no occasion to reduce their price. Now suppose an 
 agent of a number of wealthy capitalists in a distant country, to come into 
 this place with a large amount of money to lend, the owners of this money 
 being willing to lend at a much lower rate than that which had previously 
 been established. Here is a new competition in the business of lending 
 money. The price of interest falls, and the use of capital is obtained 
 much easier than it was before. The old lenders no doubt regret the 
 change, they cry out against the introduction of foreign capital, but every 
 one who has occasion to borrow money, rejoices at it. So long as the 
 borrower procures his money easier, and at a lower rate, and can make 
 so much the more profit out of it, what reason has he to regret that this 
 money has been brought within his reach from distant parts ? Shall a 
 borrower refuse to make a profit on capital offered to him on loan because 
 the interest to be paid for it, goes into the pocket of a foreigner ? And 
 why should a borrower be compelled to pay seven per cent, per annum, in- 
 terest, to a countryman, when he can obtain the use of the same money 
 from a foreign lender for four or five per cent. 
 
 A National Bank of discount stands precisely in the position of the 
 agent here supposed. Its peculiar advantages induce persons, both at 
 home and abroad, to invest their money in its stock. Thus bringing 
 in foreign capital from all directions, and introducing a competition in the 
 business of lending money, which did not before exist. This competition 
 is the very opposite of what is called a monopoly. 
 
 Monopoly consists in confining the enjoyment of any privilege to a 
 limited number of persons or institutions. If all the business of banking 
 in a state, be confined by law, to one hundred Banks, these one hundred 
 
47 
 
 Banks enjoy a monopoly of the banking business. If, on the contrary, 
 the business be thrown open to all ; or all are admitted to the exercise of 
 the privilege upon the same terms, there is no monopoly, for the competi- 
 tion is unrestricted. If the business of banking be confined in any country, 
 as in the United States, to the State Banks alone, then these State Banks 
 have a monopoly of it, but if a National Bank with its Branches come into 
 competition with the state Banks, this monopoly is destroyed. So, if there 
 were no Bank, or Banks, except the National, with its Branches, then this 
 National Bank would enjoy a monopoly ; but if the state Banks, come into 
 competition with the National Bank, this circumstance destroys the mono- 
 poly. If in any state, acts of incorporation for Banks, are granted only to 
 individuals of a certain party, then that party may be said to possess a mo- 
 nopoly of this corporation granting power ; but if such charters be granted 
 to all persons on equal terms, then there is no monopoly for the competi- 
 tion is free. The term Bank monopolies therefore, sometimes so incon- 
 siderately used, is altogether inapplicable, except when there is a restric- 
 tion on the competition in the business of banking. The operation of a 
 National Bank, then, so far from being that of a monopoly, is an element 
 of that competition in the business of lending money, without which, a 
 Bank monopoly might be said in some degree to exist. 
 
 Through the agency of a National Bank, foreign capital comes into 
 competition with domestic capital, and the price of interest is kept down 
 if not reduced. The old money lenders, and the state Banks may regret 
 this competition, but every one who borrows money, finds a benefit from 
 it. True, a certain amount of interest, in the form of dividends, may be 
 paid to foreigners ; but the profit which is the compensation of industry, 
 and enterprise, and the emolument of labor goes to enrich the country. 
 
 Foreigners lend their money, in the way supposed, merely because they 
 cannot get so good an interest at home ; and we use it, because it enables 
 us to borrow cheaper and easier than we could do otherwise. Capital is 
 more plenty, and the use of it is at a lower price in the old countries than 
 it is with us, and it is sent to this country to be lent out here on the same 
 principle that we send or would send our wheat and flour to Great Britain 
 to be consumed there. Capital seeks employment as water seeks its level ; 
 and thus the rate of interest between old countries and new, is gradually 
 equalized to the advantage of both. Not, perhaps, that the old countries 
 are so much richer, but because their wealth is collected into larger masses, 
 and held by fewer hands. It is more difficult for one person to find em- 
 ployment for two millions of dollars, than it is for twenty persons to em- 
 ploy the same amount profitably, if equally divided between them, or near- 
 ly so. Besides this, in the old countries, if the capital be more, the en- 
 terprise is less ; the distance between the wealthy classes and the work- 
 ing classes is greater ; and the capitalist and the operative are more es- 
 tranged from each other. 
 
 A Bank of the United States, may be considered a kind of vehicle by 
 which capital is brought to us from secret recesses, and from distant coun- 
 tries, to be employed or not at the hazard of those who send it. If we do 
 not want it, we shall not borrow it, nor pay interest for it ; and if we pay 
 interest for it, it is because we find our advantage in borrowing it. 
 
 But it is not only through the instrumentality of its own stock, that a 
 National Bank is the means of bringing capital into the market. We have 
 seen that such an institution must operate on other moneyed institutions, 
 so as to secure their soundness and stability, by regulating their issues, 
 
48 
 
 and preventing a too great expansion of their engagements. In doing this, 
 confidence is given to the community in those institutions themselves. 
 Capitalists will more readily invest their money in the stocks of state 
 Banks, when they see these institutions under such restriction as will ef- 
 fectually prevent the conductors of them from abusing their powers. 
 Shareholders of Bank stocks are generally satisfied with dividends equal 
 to the legal rate of interest, provided these be accompanied with a persua- 
 sion of security and certainty in their investments. Their interest 
 requires nothing more than the proper legitimate business of banking, and 
 whatever may have been the wild aspirations of some conductors of Banks, 
 it has been rarely the case, that the stockholders have been benefited by 
 them. On the contrary, while those who have the management of Banks, 
 in many instances may go out of the usual routine of their business, to 
 promote their own private views ; the stockholder, with scarcely a possi- 
 bility of being benefited by a speculative operation, is sure to feel the full 
 burthen of the loss, in the event of a disasterous result. Hence when 
 banking institutions are without a check, when these directors, or officers 
 may extend their issues without limitation, the confidence of the prudent 
 stockholder is lost, he withdraws his capital from the institution. The 
 chance of an increased dividend being no temptation to him ; he prefers 
 placing his funds where they will be safer, even if the prospect of pos- 
 sible profit be less. 
 
 Suppose a country, where there are several hundred Banks, all without 
 any other check, or restraint, than that of the degree of discretion to be 
 found amongst their directors and officers. It is evident that whatever the 
 condition of these institutions may really be, the confidence of the public 
 will be shaken. The stockholder will manifest his want of confidence by 
 selling out ; the depositor by diminishing the amount he keeps on hand ; 
 and the public by carrying back every bill to its proper Bank as fast as 
 possible. Whatever course capital may take, it will fly from these insti- 
 tutions. It will sooner seek a place of safety in foreign countries, with 
 the prospect only of a low rate of interest, than abide the issue of such_a 
 state of moneyed affairs. 
 
 Suppose on the contrary, amidst such a state of things a National Bank, 
 properly so called, to be established. Its operations unavoidably checking 
 what may be called, any tendency to a monetary licentuousness, the con- 
 fidence of capitalists is restored, they reinvest their money in the stocks 
 of the local Banks, because they can depend upon their better man- 
 agement. Their dividends may be smaller, but they will be regular 
 and sufficient. The depositor leaves his surplus in the Bank without fear \ 
 and the public keep that amount in circulation, in bank paper, without 
 fear, which before, was so hastily exchanged for gold and silver. Even 
 the foreigner who had withdrawn his money from the state Banks, now 
 remits it again to the country, to be again invested in their stocks ; not 
 because he believes the character of the people to be changed, but because 
 he knows the circumstances of the country to be changed. The opera- 
 tion of a National Bank securing to him the stability of other moneyed in- 
 stitutions, and thus restoring his confidence. 
 
 This is not a mere matter of theory, experience has shown us that, with 
 the operation of a National Bank, confidence in other Banking Institutions 
 has been unbounded : without such a Bank this confidence has gradually 
 disappeared, giving place to a panic fear, and a general withdrawal of real 
 capital. Such then being the operation of a National Bank, directly, by 
 
49 
 
 its own stock, and indirectly by the confidence it procures in the opera- 
 tions of other moneyed institutions ; bringing new supplies of real capi- 
 tal into market ; increasing the competition in lending, and keeping down 
 the rate of interest, there can be no question of the public policy to be 
 pursued in respect to it. 
 
 In every country the borrowers constitute the great mass of the people. 
 In nons perhaps, more than in the United States, not on account of the 
 poverty of the inhabitants, but on account of the room for enterprise and 
 industry afforded them. Capital is more in demand here, because more 
 can here be done with it. The working classes are borrowers, not be- 
 cause they are poor, but because by their industry and enterprise, with the 
 liberty of employment so abundantly enjoyed, they can all of them obtain 
 a profit from capital, over and above the interest they pay for it. What- 
 ever therefore, diminishes the rate of interest on capital, and facilitates 
 the acquisition of the use of it, is of advantage to the laboring classes, 
 and through them, proportionally beneficial to the country ; because it is 
 principally by the additional value, exclusive of the accumulation of 
 interest, given to property, by labor well bestowed, that the country is 
 enriched. 
 
 SECTION VI. 
 
 The operation of a National Bank in meeting the constitutional requisition ; 
 that " all duties, imposts, and excises shall be uniform throughout the 
 United States" (See Constitution, Art. 1, Sect. 8, last clause.) 
 
 We have seen in the course of the preceding remarks, that where the 
 paper currency of the country is dependant upon the management of state 
 Banks, unchecked by the regulation of a National Bank, there must be a 
 depreciation in the value of Bank bills : greater or less, in proportion as 
 the Banks of one section are managed, with more or less prudence, than 
 those of another. Consequently if duties and taxes be paid in the ordin- 
 ary paper currency of these different sections, the citizens of that part of 
 the country where Bank paper is most depreciated, will pay less duty 
 than those of other portions where there is little or none of this deprecia- 
 tion ; in which case, the revenue suffers an actual loss, and the duties and 
 taxes are not uniform. This is not merely a matter of argument, it is 
 something which has actually occurred. Previous to the charter of the 
 last United States Bank, and subsequent to the expiration of that charter, 
 this state of things has actually existed.* The only remedy for this evil, 
 without a National Bank, is, as we have also seen, a resort to hard money 
 requisitions, and an entire separation of the public moneys from those of 
 the community. This remedy too, we have tried, and we have found it 
 worse than the disease. For although the government may collect its re- 
 venue in this way without loss, the nation must lose the benefit to be derived 
 
 * Soon after the late war with England, there being then no National Bank, the 
 paper currency of Maryland being about twenty per cent, lower than of Massachu- 
 setts; certain merchants of Boston, imported their goods into Baltimore, that they 
 might enjoy the privileges of a citizen of Maryland, by paying their bonds for duties 
 in the depreciated bank paper of that city. 
 
50 
 
 from the use of all the real capital afforded by the government deposits 
 and circulation. 
 
 There has been, it is true, another expedient resorted to. Government 
 has on former occasions, as at the period already adverted to, issued its 
 own bills, termed treasury notes. But this was only making two paper 
 currencies instead of one. The treasury notes proving to be nearly as 
 various, fluctuating and unstable in their value, as the Bank bills of that 
 period ; being only something not quite so bad as Bank bills, and not so 
 good as specie. Besides this, it is evident, that the payment of all dues 
 to government in gold and silver; or gold, silver, and treasury notes, can 
 have no favourable operation, nor produce any good effect upon the Bank 
 currency of the country. It did not formerly it cannot do so at any time. 
 Confidence in Bank paper cannot, and never has been restored by it : and 
 so long as this confidence is wanting, the public moneys must continue 
 separated from thosfr of the community ; and so much available capital 
 must be drawn from employment. 
 
 It is a common error to suppose that government is called upon, in such 
 a predicament as this, to create a currency to create something which is 
 to take the place between gold and silver on the one hand, and the paper 
 of the state Banks on the other. We have already noticed that it is one 
 thing to regulate, and quite another thing to create currency. The regu- 
 lation of the paper currency of a country, by bringing all Bank bills to a 
 specie basis, and restraining all Bank issues to the representation of real 
 capital, has a happy effect in restoring confidence to the community ; and 
 in bringing other real capital from its hiding places. The creation of a 
 new paper currency, in the midst of another paper currency already de- 
 preciated, only makes bad worse. An issue of treasury notes for ex- 
 ample, receivable in payment of government claims for revenue, being in 
 fact, only so much fictitious capital till that revenue becomes due. Sup- 
 pose the United States government to issue treasury notes at this time, 
 based upon the revenue to be received. This is only creating a collateral 
 paper currency in addition to that with which the country is already flood- 
 ed : making the artificial value of property already existing still more arti- 
 ficial. A proceeding favorable indeed, to the purposes of speculators, but 
 very far from favoring the laboring classes of the community. 
 
 But suppose the government to borrow in the first instance several mil- 
 lions of dollars, in specie, in order to enable it to redeem its treasury 
 notes at sight, at any and every point where they may be presented ; as a 
 Bank without capital might commence business by borrowing money, per- 
 haps at a disadvantage, in order to enable it to pay its own bills.* In the 
 first place, the specie thus taken up by the government, is an abstraction 
 of so much real capital, a great part of which must be kept idle ; and if 
 by this arrangement, the treasury notes are every where equal to specie, 
 the same difficulty still remains. The treasury notes as well as the silver 
 and gold must be kept separate from the Bank paper around it. Govern- 
 ment vaults and safes must still be used. The Banks will still continue 
 their unrestricted issues. Public confidence must be still wanting, and 
 real capital whether in the hands of government, or in those of individuals, 
 will continue to seclude itself as it were, for safety. 
 
 * Such conduct in a Bank would be considered supremely ridiculous, how far it 
 may be esteemed otherwise in a government, must be left for its advocates to de- 
 monstrate. 
 
51 
 
 If instead of this, the treasury notes be not redeemable every where 
 with specie ; being good only for payments to the government, and that 
 only when those payments are due ; in some parts of the country they 
 must be even more depreciated than Bank paper, in others, less, but every 
 where they only add to the general confusion, enabling the citizens of one 
 part of the country to pay their duties and taxes at a lower rate than those 
 of another part. 
 
 We have now to suppose the existence and operation of a National 
 Bank. Here again, we are not dependent merely upon theory. The ex- 
 periment has been tried. Tried, too, more than once, and always with 
 success. We have no occasion to seek out a new state of things, we 
 have only to go back to that organization of the Banking System which 
 prevailed a few years since, and with which the country has been perfectly 
 familiar. The problem to be solved by the opposers of a National Bank, 
 being not how to make the state of the country better than it was ten years 
 ago, but how to make it as good without the same means. By the opera- 
 tions of a National Bank, the issues of all Banks being brought down to 
 a specie basis, the exchanges equalized, public confidence restored, real 
 capital introduced in the place of fictitious, and a safe and proper agent 
 provided for the treasury, any separation of the public moneys from those 
 of the community becomes unnecessary. The citizens of every section 
 and state in the country are enabled to pay their dues to the government 
 in the bills of their respective Banks upon equal terms, without hazard or 
 disadvantage to the public interests, and without that inconvenience and 
 loss of power in capital, which unavoidably results from a hard money 
 system. 
 
 In this way a National Bank of discount with branches, provides for the 
 collection and safe keeping of the revenue, and for the uniformity of the 
 public burthens, in the easiest, safest and most reasonable manner ; or, to 
 use the expression of the Supreme Court upon the subject, " in the man- 
 ner most beneficial to the people." And it is because such an institution 
 effects this, which cannot be effected in any other way, that it is necessary 
 and proper, and being so, its incorporation is constitutional. 
 
 We do not say that it is impossible to collect the revenue without a Na- 
 tional Bank. We know that it is possible to collect it under a specie cir- 
 culation in gold and silver, m et armis, by force and arms, if not otherwise : 
 but this is not effecting the purposes of government, " in the manner most 
 beneficial to the people." We know the inconvenience of a hard money 
 collection, we know the impossibility of collecting in depreciated paper 
 with uniformity in the payment, and without loss to the government, and 
 we know the perfect inefficiency of treasury note issues in supplying the 
 place of a well regulated Bank currency. On the other hand, we know- 
 by forty years experience, how easily all difficulties are surmounted through 
 the agency of a National Bank. We have seen during that period, two 
 such institutions successively incorporated and in operation for twenty 
 years each, receiving and paying the public moneys without the loss or 
 even a serious apprehension of the loss of a single dollar to the govern- 
 ment, without depriving the country of the use of capital derived from the 
 government deposits or circulations, with almost a perfect equalization of 
 the exchanges, and as perfect a uniformity in payment of taxes and du- 
 ties : while on the contrary, no sooner has the country been deprived of 
 the operations of a National Bank, than we have seen fluctuations, and in- 
 equalities immediately taking place, driving the administrators of gorern- 
 
52 
 
 merit to the alternative, of collecting and keeping the revenue, either unequal- 
 ly and disadvantageously in paper money, or harshly and distressingly, alto- 
 gether in specie ; and we now witness a period when for want of such a 
 Bank, confidence at home and abroad, is withdrawn and withdrawing from 
 all our moneyed institutions, real capital is flying for protection and secu- 
 rity to other countries ; and the government is more and more involved in 
 the necessity of separating the public moneys from those of the commu- 
 nity, and of creating an artificial currency, almost as fluctuating, and as 
 subject to depreciation as the paper currency by which it is surrounded. 
 
 Experience and theory here go hand in hand, we have only to enquire, 
 what was the state of our moneyed institutions during the operation of our 
 two several National Banks, what was then the state of public confidence 
 in the stability of the paper currency ? and how the revenue was then 
 collected uniformly throughout the United States ? and this too, without a 
 separation of the government moneys from those of the people. 
 
 The facts are all such as to corroborate the arguments here made use of 
 in favor of a National Bank, similar to those of which we have heretofore 
 enjoyed the benefit. 
 
 NOTE. It is not designed to enter into a legal argument here, as to the right of 
 Congress to establish a National Bank. Two such Banks, as almost every one 
 knows, have been successively in operation in this country ; each for the term of 
 twenty years ; and not long after the incorporation of the last of these two Banks, 
 the question of the constitutionality of its charter, was carried up to the Supreme 
 Court of the United States, the authority of which court, according to the Constitu- 
 tion, (Art. 3, Sec. 2,) being decisive in all matters of the kind. The trial was of the 
 most important character that could be selected, as it was an issue between a sover- 
 eign State on the one side, and the National Bank on the other, the argument 
 on both sides being conducted by perhaps the most able legal counsel at that time to 
 be procured. 
 
 The following decision of the Bench, delivered by Judge Marshall, himself a 
 Constitutional veteran, set the matter at rest, with regard to that Bank, (4 Whea- 
 ton, 424) : 
 
 " After the most deliberate consideration, it is the unanimous and decided opinion 
 of this Court, that the act to incorporate the Bank of the United States, is a law made 
 in pursuance of the Constitution, and is a part of the supreme law of the land." 
 
 This opinion was given in the year 1819, that Bank having been chartered 
 April 10, 1816. The only remaining inquiry is, then, whether the circumstances 
 of the present period, are such that the incorporation of a National Bank would be as 
 constitutional now, as it was then. 
 
 Admitting the power of Congress to establish a Bank, to rest principally on the 
 provision (Constitution, Art. 1, Sec. 8,) to make all laws which shall be necessary and, 
 proper for carrying into execution the express powers before granted, the main ques- 
 tion presented to those who are scrupulous on this point, is whether a law establish- 
 ing a National Bank be at this lime necessary and proper for carrying into effect any 
 of the powers expressly granted to Congress. Whether, for example, a National 
 Bank be necessary and proper now, to enable Congress " to lay and collect taxes, du- 
 ties, &c.," in such a manner as that " all duties, imports and excises, shall be uniform 
 throughout the United States." 
 
 In coming to a decision on this point, we are to adopt the rule of construction, laid 
 down by the Supreme Court of the United Stales, in the case above refered to, that 
 the words necessary and proper, do not imply an absolute necessity. We have only 
 to inquire whether a law establishing a National Bank, (of discount, with Branches,) 
 be reasonably necessary and proper, for the purpose in contemplation, so as to enable 
 the government to accomplish that purpose inthe safest, most convenient, and most 
 equitable manner; (see opinion of the court, 4 Wheaton, 412424.) It is not requi- 
 site to show that it is impossible to collect the revenue without such a National Bank. 
 All that the Constitution requires, is to show that such an institution is reasonably 
 necessary and proper, or appropriate ,to the wants of the government in this respect - t 
 necessary and proper, because the matter in hand can be accomplished better ia 
 this than in any other way. 
 
53 
 
 On this point we are to bring to bear our experience and observation of the diffi- 
 culties and disadvantages arising from a collection of public dues in hard money, on 
 the one hand, and in paper money, without a National Bank, on the other : subjecting 
 the nation, in fehe first case, to an immense loss of available capital, and in the last, 
 to the unconstitutional mode of levying duties and taxes unequally in different 
 portions of the country. 
 
 How far such a Bank as is under contemplation, may be necessary and proper to 
 meet the wants of the government, must, in the nature of things, be a matter about 
 which the legislative branch of the government only can decide, at the time of pass- 
 ing the act of incorporation. 
 
 Upon this point, the following opinion of the Supreme Court, in the case before 
 cited, is abundantly explicit : 
 
 " We think the sound construction of the Constitution, must allow to the national 
 legislature that discretion, with respect to the means by which the powers it confers 
 are to be carried into execution, which will enable that body to perform the high 
 duties assigned to it, in the manner most beneficial to the people " 
 
 And again, (page 423): "The time has passed away when it can be necessary to 
 enter into any discussion in order to prove the importance of this instrument, [a Na- 
 tional Bank,] as a means to effect the legitimate objects of the government." 
 
 ." But, were its necessity less apparent, none can deny its being an appropriate 
 measure ; and if it is, the degree of its necessity, as has been very justly observed, is 
 to be discussed ia another place. Should. Congress, in the execution of its powers, 
 adopt measures which are prohibited by the Constitution or should Congress, under 
 the pretext of executing its powers, pass laws for the accomplishment of objects not 
 entrusted to the government it would become the painful duty of this tribunal, 
 should a case requiring such a decision come before it, to say that such a law was 
 not the law of the land. But where the law is not prohibited, and is really calculated 
 to effect any of the objects entrusted to, the government, to undertake here to inquire 
 into the degree of its necessity, would be to pass the line which circumscribes the 
 judicial department, and to tread on legislative ground. This court disclaims all 
 pretensions to such power." 
 
 It has been accordingly twice decided by Congress, as is evidenced by the acts of 
 incorporation of 1791, and 1816, approved by the Chief Magistrates then in the presi- 
 dential chair, that a National Bank of discount, with Branches, was necessary. We 
 have then only to ask, whether the institution be not as reasonably necessary and 
 proper now, as it was at the two periods when the two former Banks were incorpo- 
 rated. If it be so, and Congress decide that it be so, then there can be no question as 
 to the constitutionality of the law giving it existence ; and the people having (by 
 their representatives) decided in favor of the necessary and proper character of the 
 institution, the act of incorporation is the evidence itself of this decision, and thus 
 bears testimony to its own constitutionality. 
 
 It is in this view, especially, that it becomes important for the people to inquire, for 
 themselves, how, and in what manner, a National Bank is a suitable instrument of 
 government, and in what manner its operations are beneficial to the country which 
 is the inquiry we have here been endeavoring to pursue. 
 
54 
 
 PART THIRD. 
 
 OBJECTIONS TO A NATIONAL BANK. 
 
 SECTION I. 
 
 Parties having an Interest in Opposition to all Banks, or any new Bank. 
 
 The advantage of Banks generally, and the usefulness of a National 
 Bank being such as have been here set forth, let us inquire what class of 
 persons may be supposed to object to either one or the other ; and what 
 objections they may reasonably urge. 
 
 The operation of a Bank, as we have seen, is to bring into market cap- 
 ital otherwise lying dormant ; thus enabling the borrower to obtain money 
 more easily, and reducing the rate of interest. 
 
 If, in a certain city, there be no Bank, all the business of lending money 
 will be in the hands of a few rich men, or of those whom they may em- 
 ploy as agents. These persons very naturally object to the establishment 
 of a Bank. They think there is no need of more capital. They think the 
 rate of interest low enough already, and they will probably exclaim against 
 the Banking System, as calculated to encourage trading on what they call 
 false capital* They will maintain that no one should trade, who has not 
 money of his own, enough and to spare, unless perhaps he borrow of them 
 at the price they ask. Their interest is, as they may think, to keep all 
 the lending business in their own hands ; and hence they may object to a 
 Bank, or Banks. [But what have the people to do with such objections as 
 these ? 
 
 Banks raise, as we have seen, capital, and real capital, too, from their 
 circulation. The rich money-lender may jeer at this circulation, and cry 
 out against shin plasters, and those who issue them ; but the mechanic, 
 the farmer, the trader, the borrowers of the capital thus raised, have no 
 reason to declaim against Banks. A Bank raises capital from the propor- 
 tion of its deposits, lent out at simple interest. The money-lender may 
 call this loaning the property of others, and think that borrowers would 
 do better to pay him a higher rate of interest, because he lends his own 
 money ; but the borrower from the Bank has no reason to complain ; and 
 so long as depositors are willing to allow their money to be used in this 
 way, no one can have reason to be dissatisfied, except the rich money- 
 lender, who finds the Bank a competitor in his business, and actually 
 lending lower than he does. 
 
 So long as Banks deal only with real capital, the laboring classes must 
 be benefited by their operations. They have only to be watchful, that a 
 
 * See distinction drawn between fictitious and borrowed capital, page 10- 
 
55 
 
 Bank does not introduce fictitious capital into circulation ; because this 
 is, in effect, a fraud upon the public, necessarily resulting in disaster, 
 from the operation of which the laboring classes are least to bfc benefited, 
 and first to suffer inconvenience. 
 
 If there be but one Bank in a place, that institution may have reason to 
 object to the establishment of another Bank ; for the new Bank may take 
 away part of the deposits, and occupy part of the circulation of the old Bank, 
 and the opportunities for lending money may be divided. The same with 
 any number of Banks in one location ; they will regard every new estab- 
 lishment as operating against them as an interloper creeping into their 
 place, and diminishing their profits. No one wants a new competitor in 
 his business ; and as the rich man objects to the establishment of any 
 Bank, where he is, so any Bank, or Banks, already established, may ob- 
 ject to the coming in of a new Bank. But what objection can the people, 
 or can borrowers, have to such an additional establishment ? Every new 
 Bank bringing in new capital, and more money to lend ; and the stock- 
 holders taking the risk whether the business be profitable or not, those 
 who are likely to borrow, cannot object. The laboring classes can have 
 no interest in objecting; for the more capital, the greater the prospect of 
 employment. The people cannot object, provided only, that these institu- 
 tions, for the reasons already given, be prevented from introducing ficti- 
 tious capital. 
 
 It is, indeed, a matter of surprise, that Banks, properly conducted, ever 
 should have been considered hostile to the interest of the poorer and la- 
 boring classes, the fact being well known, that by means of bank shares, 
 the smallest capitalists may place their few hundred dollars in a way to 
 obtain a safe and profitable income from the amount, while the industrious 
 workman, or the enterprizing trader, through the same means, is able to 
 obtain so much the more easily, the use of the small additional capital, at 
 any time required to fulfill his engagements. 
 
 Rich men may borrow of rich men. He who wishes to borrow his ten 
 or twenty thousand dollars, and has abundant security to offer for it, may 
 make arrangements for a loan with his wealthy neighbor; but the laboring 
 man, the artizan, the mechanic, the house-keeper, the small trader, will 
 not be able to borrow his two or three, or five hundred dollars, without a 
 Bank. So, without a Bank, the small trader can scarcely obtain credit, 
 because his note cannot be discounted as it would be by an institution, 
 preferring, perhaps, the discounting of notes of small amount, and requiring 
 only a good reputation on the part of the promiser. Even the day-laborer, 
 where there are no Banks, may find half his time unemployed, and his 
 daily pay reduced, because there is not capital enough within reach of the 
 enterprizing contractors, upon whom he depends for occupation. Banks, 
 therefore, so far from being engines, or organs, of the rich, are just the in- 
 stitutions of which the rich only have reason to complain. They are, in 
 fact, inventions enabling the poor to do wtihout the rich ; and it is for this 
 reason that they are most useful in countries of which the population is 
 composed principally of the middling classes ; enterprizing and industri- 
 ous, but in want of capital. 
 
 These classes, then, not only have no reason to object to the establish- 
 ment of Banks, but they have great reason to advocate their existence, 
 and even to favor their multiplication, provided they are subject to such a 
 check as will prevent their creating fictitious capital. 
 
56 
 
 SECTION II. 
 
 Interests opposed to a National Bank the case 0/RiCH MEN, and 
 MONEY DEALERS. 
 
 Let us now suppose a National Bank to be about being organized, cal- 
 culated precisely as we have represented it to be, to bring forward new- 
 supplies of real capital, to equalize the Exchanges, and to regulate the 
 issues of other Banks ; what class of persons may reasonably object to 
 such an institution, and what objections may they urge ? 
 
 The rich man may object, as we suppose him to have done before, and 
 for the same reasons. Tell him that a National Bank will bring new cap- 
 ital into the country ; he will say there is capital enough here already. 
 He will be for prohibiting the introduction of foreign capital, and may talk 
 of the duty of encouraging our own capitalists, and the patriotism of fos- 
 tering and using only our own means. Tell him that the operations of a 
 National Bank will tend to keep down the interest of money. He will 
 say, " this is the very thing 1 am afraid of." He thinks the rate of interest 
 already too low. He wants no Banks to come into competition with him 
 in the business of lending, and least of all a National Bank. Tell him 
 that such an institution will prevent other Banks from extending their busi- 
 ness, and multiplying their issues, beyond their proper limits. He is per- 
 haps at this time a holder of bank stock, and is afraid that his dividends 
 will be diminished. Or tell him that a National Bank will prevent the 
 moneyed institutions of the country, generally, from creating fictitious 
 capital, and giving an artificial value to every kind of property. He may 
 consider this as operating particularly against his own interests. He has 
 immense property to sell, and comparatively nothing that he is obliged to 
 purchase. What he has to dispose of will sell at so much higher prices, 
 in proportion as the currency is depreciated. His property will be doubled, 
 trebled, quadrupled, according as the Banks are allowed to extend them- 
 selves without limit, and he trusts to his own sagacity to make sales at 
 high prices, in time to place his money in something not liable to suffer 
 by the subsequent reaction. He has every thing to gain by a derange- 
 ment of the currency, and nothing, as he thinks, to lose by it. Tell him 
 that a National Bank will bring the paper currency to its proper level, and 
 prices of all kinds to their proper and proportional specie standard : he 
 will prefer having his large estates remain at their existing high valuation, 
 although he knows this value to be in a great degree fictitious. What 
 desire can he have to regulate the currency? " Let well alone," he will 
 say, " I am satisfied with things as they are." 
 
 The position of the people must certainly be very different from this. 
 The rich man, especially if he be at the same time a great speculator, may 
 object with some reason to a National Bank ; but the laboring man, the 
 artizan, and small capitalist, have all a different interest to provide for. 
 How small, then, must be the number of objectors, on this score, in com- 
 parison with the great mass of the people. 
 
 The dealer in Bank Bills, and in domestic exchanges may object to the 
 establishment of a National Bank. He wants no competition, like the 
 Branch of a National Bank, to take part of his business out of his hands. 
 
57 
 
 He wants no equalization of the currency, bringing the Bank bills of Ala- 
 bama and Georgia, almost to a level with those of New York. He will 
 call this taking the bread out of his mouth. Confusion and instability iu 
 the currency, are the elements of his harvest. The profits of his busi- 
 ness are to be estimated in proportion to the inequalites and uncertainties 
 of the rates of exchange. Tell him that a United States Bank, such as 
 it should to be, will collect money from all parts, and in all parts of the 
 country cheaper and quicker, than it could be collected in any other way ; 
 and you will represent it to him, as of all things, one of the last establish- 
 ments for him to promote. The dealer in exchanges, and the changer of 
 paper money, we admit, may have some reason to object, but what have 
 the people to do with their objections ? 
 
 If the greatest difference between the values of the bills of different 
 Banks, or between the values of the Bank, money of different states, do 
 not exceed one per cent., the exchanger of this money cannot make a 
 profit in any case exceeding one per cent., but if the difference be ten or 
 fifteen per cent., there is so much more room, and so much better chance 
 for him to make two or three per cent., or more, instead of one. 
 
 If there be but one person in a town, whose business it is to exchange 
 Bank bills, he will ask his own prices, and make so much better profit, he 
 will not of course, wish another person to take up the business in his 
 neighborhood ; so if there be several engaged in the same business, although 
 the rates may be reduced by competition, none of these persons would 
 wish to have a Bank established in their neighborhood, especially if the 
 Bank effected these exchanges at a lower rate than they could. 
 
 Suppose in each of these twenty-six United States, one hundred per- 
 sons, whose business it is to deal in the bills of exchange and Bank paper 
 of the different states. Here will be twenty-six hundred persons in the 
 whole country, having the reason just given, for opposing the establishment 
 of a National Bank. The greater the difference in exchanges, the bet- 
 ter for them. A National Bank diminishes the difference ; leaving 
 them room perhaps, for scarcely more 'than one quarter or one half per 
 cent, profit. " What's the use of a National Bank ?" they will say, " We 
 can manage the exchanges :" " Let trade regulate itself." What's the use 
 of canals ? the waggoner may say, with as much reason. Leave the trans- 
 portation of goods to us. What's the use of railroads ? says the stage 
 coach driver, " Leave the carriage of passengers to us : we can manage it : 
 let trade regulate itself." But the merchant who has sold his goods to 
 dealers in distant sections of the country, sees the use of equalizing 
 and giving stability to the exchanges ; and the dealer, who comes 
 from a distant state, to purchase goods, and is obliged to change his money 
 at a loss of five, ten, or fifteen per cent., sees the use of a National Bank. 
 
 The exchanger of money is able to make a mystery of his art. He ob- 
 tains the best information he can as to the state of the several Banks ; 
 and as to the changes expected to take place in their management. The 
 dealer in merchandize cannot obtain this information. His ignorance 
 subjects him to anxiety, and he sells his bills at the best price he can ob- 
 tain, and the greater the depreciation in the bills he has, the more he is at 
 the mercy of the exchanger. 
 
 Nor is the seller or buyer of goods the only party concerned in this 
 loss. The consumer has eventually to pay for it. The loss in exchanging 
 money being as direct a charge upon the goods consumed as the expen- 
 ses of transportation. Every one who eats, and drinks, and wears clothes, 
 
 8 
 
58 
 
 and needs the shelter of a house, having the same kind of interest in 
 equalizing the currency, by the aid of a National Bank, that he has in fa- 
 cilitating the transportation of merchandize, by the aid of rail roads and 
 canals. While then the interest of the twenty-six hundred persons, en- 
 gaged in changing money, may be opposed to the establishment of a Bank, 
 the interest of ten millions of consumers, and of hundreds of thousands 
 of traders, throughout the country, is directly and urgently in favor of it. 
 
 SECTION III. * 
 
 Case of Sellers of Foreign Exchange. 
 
 There are certain objectors, few in number, but of a very respectable 
 class, who have really no disposition to oppose the establishment of a Na- 
 tional Bank, provided it does not deal in foreign bills of exchange. 
 
 If a National Bank with its immense capital, sell its own bills, or bills 
 with its own endorsement, these bills of course will generally command a 
 preference over those of individuals, or of private banking institutions. 
 These last, being known to be good only to comparatively a small number 
 of persons, while the bills of a National Bank are known, or believed to 
 be good by all persons, almost in all parts of the world. Such was the 
 case with the bills of the late United States Bank, properly so called ; and 
 such no doubt would be the case with any other National Bank properly 
 organized and conducted. 
 
 This preference however, after all, is in general, but a mere matter of a 
 quarter or half per cent, difference, affecting more the vanity or mercan- 
 tile pride of the individual drawer of bills, than his real iaterest. The 
 Bank too, in consequence of its extensive arrangements, may sometimes 
 be able to sell bills lower than other drawers, and sometimes its opera- 
 tions in this portion of trade may interfere with the interests of those who 
 derive an emolument from the business of buying and selling foreign ex- 
 change ; but if the seller of private bills be aggrieved, the buyer of ex- 
 change it is to be remembered, is benefited ; and the lower foreign exchange 
 is obtained, the lower goods may be imported, and the cheaper the consu- 
 mer will be supplied. It is only, however, a portion of the sellers of for- 
 eign bills, who have reason to complain ; for a large part of the drawers 
 and sellers are accommodated by it ; being enabled to sell their exchange to 
 the Bank, at times when perhaps they could not dispose of it otherwise, 
 without some undesirable hazard, or, without a sacrifice in price. The 
 operations of the Bank tending to moderate the action of the market ; pre- 
 venting the rate of exchange from rising too high at one time, and from 
 falling too low at another. These two extremes being equally undesirable, 
 as it is the same with exchange as with the necessaries of life. Too high 
 a rate must be followed by an inordinate supply, reducing the rate too 
 low ; and too low a rate, being inevitably followed by a scarcity which again 
 causes an unreasonable increase of price. 
 
 The operation of foreign exchange is the same, in this respect, as that 
 of domestic already alluded to. If the products of this country could be 
 sent abroad, precisely at the time, when, and in proportion as, those of 
 other countries are brought this way ; so that every one thousand dollars 
 worth of cotton, or flour, or tobacco, could meet its exact amount in dry 
 goods, hardware, &c., there would be little or no accomodation required in 
 bills of exchange ; but we know that the crops of this country must be 
 
shipped at a certain season ; and we know that the goods we import must 
 be procured at certain other seasons. The proceeds therefore of our cot- 
 ton, or flour, might not be wanted to pay for the foreign goods imported 
 against them, till six or eight months after the crop is brought in. The 
 grower would then be obliged to wait this period for his money, were it 
 not for this process by which through bills of exchange, these two 
 amounts are made to meet each other. The planter draws upon his fac- 
 tor, allowing ample time for the sale or shipment of his cotton ; obtains 
 the money for his draft, and is then in funds for his crop, as soon as it is 
 grown. The factor waits for the moment of demand, and sells the cotton 
 on credit to the shipping merchant, whose note he gets discounted in time 
 to meet his acceptance of the planter's draft. The shipping merchant 
 again having credit, waits till the proper time for shipping, and then draws 
 his foreign bill of exchange, so as to leave ample time for it to meet the 
 proceeds of the cotton. But the shipper of cotton at Mobile, or New 
 Orleans, meets with no one there in want of a bill of exchange to remit 
 for foreign goods. If there be a Branch Bank at either of these places, 
 dealing in foreign bills of exchange, he sells his bills to this Branch, and 
 receives the money in time to pay the note given for the cotton. The 
 Branch at New Orleans sends the bills to the Branch at New York, here 
 the bill is kept till it is wanted, and called for ; that is, till remittances are 
 wanted to meet the dry goods, &c., ordered. The time elapsing between 
 the coming in of a crop, and the moment when its amount is wanted, to 
 pay for the foreign product, in return, is thus divided between the several 
 parties. All are accommodated with funds, while all are enabled to wait 
 the proper time, either for selling or buying ; and this with the smallest 
 possible loss of time or expense. The case is the same, if the process 
 be reversed. If the goods imported, be brought in first, the importer looks 
 to the coming crop for the means of meeting a remittance. He applies to 
 the planter, whose crop has not yet gone to the shipping port. The factor 
 has not received the cotton to be sold, and the shipping merchant cannot 
 yet buy the cotton upon which he should draw. The importer then ap- 
 plies to the Branch Bank in his neighborhood. The Bank has no bills 
 at the moment, but it will have a supply when the crops come in, and are 
 sold, in the meantime it has an ample credit abroad. The Bank there- 
 fore furnishes the importer in advance with those funds, which are to come 
 out of the next crop some months afterwards. Having done this, the 
 Bank is so much more disposed to buy the bills of the shipping merchants, 
 and the shipping merchant is so much better enabled to pay the factor, 
 and the factor so much more ready to accommodate the planter. Either 
 way the process is calculated to make the greatest possible saving of time 
 and expense, while it brings the wants of the consumer of foreign pro- 
 ducts, and the wants of the producer of domestic products, to meet each 
 other in respect to time, as it were, half way. Who are the parties most 
 benefited. Evidently, those at the two extremes. Every facility, and every 
 saving of time, and expense in the intermediate stages of this process 
 being calculated to enable the planter to obtain a better price for his cot- 
 ton, and the consumer to obtain his goods at lower rates.* 
 
 * The American grower of cotton, for example, whose products are sent to Eng- 
 land, being in this matter, at one extreme, and the American consumer of English 
 goods, being at the other 'extreme. The American consumer depending upon the 
 American producer, to pay for what he consumes ; and the American producer de- 
 pending upon the American consumer for the pay of what he produces, it becomes 
 the interest of these two parties to diminish all intermediate charges or expenses. 
 
60 
 
 If there were no United States Bank and Branches, the process would 
 be nearly the same, except that what we have supposed to be done by a 
 Branch Bank, would be done by individual merchants, or Bankers, who 
 could not do it generally speaking, with the same ease or to the same ex- 
 tent ; and who could not afford to do it, and would not be willing to do it 
 without some additional charge, which a Branch Bank would not make. 
 Whatever this additional charge be, and whatever additional loss of time 
 there may be, this charge, and this loss is so much to be divided between 
 the parties at the two extremes. The producer having so much less to 
 receive for his crop, and the consumer so much more to pay for the foreign 
 articles of which he makes use. We have then only to compare the num- 
 ber of individuals losing a commission or per centage, by this competition 
 of a National Bank, on the one side, with the number of producers and 
 consumers benefited by it on the other. 
 
 It may be admitted, however, that for the purpose of regulating the cur- 
 rency, and of performing the duties of a government agent, it is not di- 
 rectly necessary that the Bank should be a dealer in foreign exchange. It 
 is one thing to equalize the exchanges between the several United States, 
 and another thing to equalize the exchange between the United States and 
 foreign countries. It may not be directly necessary indeed, that a National 
 Bank should be a dealer or speculator in any thing. The Bank may col- 
 lect drafts, and discount their amount, and charge its per centage for col- 
 lecting to meet the difference of exchange and expense, leaving it for or- 
 dinary competition to reduce this per centage to its lowest rate. In such 
 case, if the stockholder do not gain as he might do, by buying and selling, 
 he will not on the other hand, incur the chance of loss. So in the case of 
 foreign exchange, the Bank may discount, and collect it, or sell it, 
 charging only the interest, and the actual expense, or loss incurred, but 
 this would not meet the objection of its opposers here : the objection in 
 the case supposed, being not that the Bank makes a profit by foreign ex- 
 changes, but that it does the business cheaper than individuals can do it ; 
 and so prevents them from making their usnal profit out of it. 
 
 On the other hand, although it may not be directly necessary for the Bank 
 to deal in foreign exchange, it may be indirectly so. If this privilege 
 like others already mentioned, be necessary to induce capitalists to sub- 
 scribe for its stock ; this might be a sufficient reason. For a National 
 Bank can effect none of the purposes for which it is required, without an 
 ample capital, and it cannot obtain this capital, unless its charter afford 
 sufficient inducements to prompt those, who have money to spare, to invest 
 it in the stock. 
 
 Independent of this, there is a further reason, why the Bank should pos- 
 sess the faculty of dealing in foreign exchanges. We have seen that 
 there must be a certain lapse of time between the period, when foreign 
 products are taken up for this country, and a period when the crops 
 of this country reach the point where they meet these products. There 
 are periods when in the natural course of trade, there may be neither 
 produce nor exchange going forward to meet the foreign imports 
 coming this way. At these moments to supply the deficiency, ship- 
 ments of specie must be resorted to. Large shipments of specie call- 
 ed for unexpectedly, produce embarrassment and alarm, on the part of 
 the local Banks, frequently indeed unnecessary. This alarm often be- 
 comes a panic, the paper currency is affected, and the whole community 
 is inconvenienced. At such a moment a National Bank, with a large 
 
61 
 
 credit abroad, is able to furnish an amount of exchange in anticipation of 
 of the next crop. This exchange goes forward instead of the specie that 
 would otherwise be sent. The expense, and loss of time, incident to 
 transporting the precious metals, is saved to the country ; the inconve- 
 nience of a pressure is saved to the local Banks ; the paper currency is 
 not affected ; and no panic or alarm occurs. Meantime the Bank is able 
 to wait till the crops come in, and are sent forward, when it purchases the 
 bills of shippers to reimburse the amount previously drawn for, in antici- 
 pation. The whole community are thus accommodated ; and even the indi- 
 vidual dealears in foreign exchange, who have had some reason to com- 
 plain of this competition, rind an important advantage in the arrangement. 
 Their own operations being carried on with so much the greater facility, 
 while the supply of foreign exchange, afforded by such an institution, 
 modifies the call for specie, for even the most distant quarters of the 
 world ; insuring greater confidence in the local Banks, and more stability 
 in the currency. 
 
 It is not for the interest of the stockholders of a Bank, however, that it 
 should be allowed to speculate in any thing. Its proper business is strictly 
 and simply that of lending money ; and its dealing in foreign and domestic 
 Exchange, is only one form of this business of lending. If it lend money 
 on bills of exchange, it must have the means of getting this money back ; 
 and this is to be done by drawing its own bills, or selling those in its pos- 
 session. The Bank, in the mean time, charging no more than sufficient 
 to cover the extra expense and loss of time to whieh it may be exposed. 
 If the Bank cannot draw and sell its bills, it cannot lend money on bills. A 
 Branch, for example, cannot, in such case, lend money at Charleston, 
 Savannah, or New Orleans, on the bills of shippers of cotton, and remit 
 those bills to the Bank at New York, to be there sold or remitted, and 
 drawn for. This business will then be done through the intervention of 
 third persons, and it is evident how very small" must be the number of per- 
 sons thus benefited by the restriction on the Bank, in comparison with the 
 number of those to whom it is an occasion of serious inconvenience and 
 loss. 
 
 NOTE. Keeping in view the position, that the proper business of a Bank, and es- 
 pecially of a National Bank, is that of lending money only, all objections to such a 
 National Institution, arising from the supposition of its engaging in speculations, are 
 set aside. They do not belong to the case. A National Bank is not necessarily 
 a dealer or speculator, and it is no difficult matter so to frame its charter as 
 to prevent such an abuse of its powers; while the restriction, the stronger it is, 
 will be the more fully satisfactory to those who subscribe to its stock the sharehold- 
 ers aiming especially at a safe investment of their capital, with moderate but regular 
 dividends. 
 
 SECTION IV. 
 
 Interests of State or Local Banks, in opposition to a National Bank. 
 
 The officers, directors, and stockholders, of State or Local Banks, may 
 object to the establishment of a National Bank. 
 
 These persons may suppose it to be for the interest of their institutions, 
 to monopolize the banking business as far as they can. They have the 
 same general objection to a National Bank, which we have supposed rich 
 men to have to them. They want no more competition in the business of 
 
62 
 
 lending money. They, too, will say there is capital enough in the country 
 their capitals are enough. 
 
 Besides this, wherever a National Bank, or one of its Branches, is es- 
 tablished, it must take up some of the deposits and circulation of the other 
 Banks. The several Banks of a city cannot, for this reason, look with a 
 favorable eye upon the introduction of a Branch Bank ; and the more 
 money this Branch has to lend, the worse they think it will be for them. 
 Those who make their deposits in the Branch, finding a preference on 
 that account in obtaining loans, withdraw their deposits in whole or in part 
 from the State Banks, to place them in the National Bank ; and if they 
 borrow money of the Branch, they will receive the amount, or a large part 
 of it, in the bills of the National Institution ; and as these get into circu- 
 lation, they must occupy the place, in some degree, of the bills of the other 
 Banks. 
 
 As, then, the profits of a Bank are in proportion to the amount of its de- 
 posits and circulation, and as the establishment of a National Bank of dis- 
 count, with Branches, may be supposed in this way to diminish the profits 
 of the State Banks, these have here some reason for objecting to the es- 
 tablishment of such an institution. But what have the people to do with 
 this objection ? What have the laboring classes to do with it ? The great 
 mass of the people can have no direct interest in bank stocks ; and even 
 the interest of the stockholders themselves, is small, in the matter of their 
 profits, in comparison with that which they have in the general prosperity 
 of the country in the stability of all kinds of property in the regulation 
 of the currency and in the reduction of the exchanges, as owners, as 
 buyers and sellers, and as consumers. The disadvantage, too, which 
 holders of bank stock might, in the case supposed, experience from a di- 
 minution of their dividends, must be more than compensated by the secu- 
 rity given to their investments in the several Banking Institutions in which 
 they are interested. 
 
 But some of the Banks have another interest at stake in this matter, 
 distinct from, and even opposed to, the interest of the people. 
 
 These are the Banks inclined, or Urged, to extend themselves improp- 
 erly. The officers are disposed to lend largely, that, their customers being 
 accommodated, they may themselves be the more popular, and their insti- 
 tution appear in a more flourishing condition. Some, too, may have their 
 own speculations, or those of their friends, to favor. The directors are, 
 for the most part, in business. They wish to borrow more and more. 
 They receive no compensation, except the loans they procure from their 
 Banks. Every thousand dollars a director is able to borrow, may afford 
 him a certain per centage of profit ; and the only pay he receives is this 
 profit on the amount of capital thus at his disposal. A director may not 
 borrow because he is needy, but because the more he borrows, the greater, 
 he supposes, will be the profits of his business. He has besides, in his 
 ordinary dealings, his set of customers, to whom he sells, whose credit it 
 is his interest to sustain, and to whom it is desirable for him to grant facil- 
 ities, that they may give the better prices for the goods he sells them. He 
 may be a commission merchant, too, and the greater advances he can 
 make, the greater the amount of consignments he may receive. 
 
 The same may be the case with the customers of a Bank ; their ac- 
 counts are valuable, because they keep large balances in the Bank to their 
 credit ; and it is necessary to acceed to their demands, or they will with- 
 draw their accounts, and go to some other Bank, where they expect more 
 
accommodation. Or perhaps they are stockholders, and may use their 
 influence at the next election, in favor of a board more disposed to meet 
 their wishes. Some borrowers, too, obtain money from their Banks, on 
 condition of circulating the bills in distant parts of the country, from 
 whence they cannot be expected to return very speedily. 
 
 The conductors and customers of Banks, thus influenced, wish to be 
 unshackled in their proceedings. They are for the largest liberty, particu- 
 larly for themselves. They profess to see no use in a National Bank. 
 They scoff at the idea of a great regulator, as they call it. Represent to 
 them a National Bank acting as a check upon other Banks, and they ex- 
 claim against it as a MONSTER. They will vociferate about state rights; 
 as if state rights consisted in the right of State Banks to issue paper money 
 never to be redeemed. Their cry is give, give. Let them be told that their 
 Bank cannot lend all they ask for, because it has to check with the Branch 
 of the National Bank in its neighborhood, and will be called upon to fur- 
 nish specie for any excess of its own bills, already perhaps exceeding their 
 proper limits. Who wants to be hampered in this way ? they say. " Down 
 with monopoly down with the monster." Their language and their opin- 
 ion, perhaps, may be that their city, or their town, would be the greatest 
 in the world, if it were not, as they say, for the United States Bank. 
 
 This is perfectly natural. It is perfectly natural that such Banks, and 
 such persons, should be opposed to any thing like a check or regulator. 
 But these persons are not the people. They are not even the majority of 
 the borrowers at their own Banks. It will generally be found that Banks 
 thus over urged, are so by a small number of large borrowers persons of 
 grasping, monopolizing views, distinct from the numerous class of small 
 traders, to whom Banks, in general, are most useful. 
 
 Banking Institutions, satisfied with business to the extent of their 
 means, and never issuing bills or obligations beyond their ability to re- 
 deem, have nothing to apprehend from the restrictive operation of a Na- 
 tional Bank. No more than an individual who never signs a note, or 
 contracts a debt, beyond his ability and inclination to pay, has any thing 
 to fear from the process of the law. A National Bank, in checking the 
 issues of State Banks, can go no farther than calling upon each to pay its 
 own debts; and this is no more than they are bound, upon every principle 
 of justice and equity, to do. But this, the objectors may say, is just what 
 they wish to provide against,,. Our Banks, they may say, are not always 
 able to pay .their notes ; and when this is the case, they do not wish their 
 inability to be known. If they cannot pay, the longer they can keep their 
 weakness concealed, the better for them and for us. We shall be able to 
 borrow so much the more, and so much the longer, without being called 
 upon ourselves, and betraying our weakness. 
 
 But what have the people, especially the laboring classes, to do with 
 objections of this kind ? Suppose that of seven hundred and fifty Banks 
 in the United States, five hundred are conducted in this way ; and that of 
 these five hundred, fifty of the directors and customers of each, urge the 
 objections above alluded to. Here we have, in all the United States, 
 twenty-five thousand persona objecting to a certain public institution, be- 
 cause it interferes with their private interests ; while on the other hand, 
 there are more than fifteen millions of persons whose interests imperatively 
 require the establishment of this very institution. 
 
 Let us suppose a case. A few persons, having a powerful influence 
 with certain Banks, enter into a speculation in wheat, flour, &c. They 
 
64 
 
 buy up these articles as far as their ordinary means, and credit, will ex- 
 tend. Having bought, in the first instance, in expectation of a rise, they 
 must now buy to make their own expectations good. There is no National 
 Bank to operate as a check upon other Banks. These institutions are, 
 therefore, abundantly liberal. Credit is unbounded. Most of the bread 
 stuffs of the country are bought up, or are in the hands of those who think 
 they may as well profit by what is going on, as the speculators themselves. 
 The warehouses of the city are full, as well as the granaries in the towns 
 and villages ; and multitudes of stacks of grain are to be met with all 
 over the country. Still there is a great talk of scarcity, and almost a fam- 
 ine is apprehended. But the higher the prices rise, the higher these 
 holders expect the prices will rise. Every thing now depends upon the 
 Banks. There is yet some months before another crop can come in. As 
 long as the Banks do not call upon the borrowers, these borrowers will 
 not be obliged to sell any part of the stock they have accumulated. The 
 distress with the poorer classes increases the prices of wheat, and flour, 
 and corn, are doubled but speculators are not obliged to sell, and there- 
 fore will not sell. Riots ensue, and even the warehouses are sacked by 
 the populace for bread. 
 
 In the midst of this state of things, supplies come in from abroad. Our 
 speculators cannot control the foreign market, as they have done their 
 own ; a different class of sellers spring up ; competition takes place, and 
 prices fall. Speculators and other traders are ruined ; and even the farmer, 
 who has been hoarding up his crop, is obliged to sell at last at less than 
 the ordinary price, with the loss perhaps of a year's toil and pains and 
 anxiety, in attempting to sustain a monopoly. Thus we find the distress 
 of consumers, and the ruin of speculators, and the heavy loss of others, all 
 originating with the too abundant liberality of a few unrestrained Banking 
 Institutions. Had the Banks in question been otherwise situated had 
 they been subject to the check of a National Bank these speculators 
 could not have counted upon such extraordinary facility. This monopoly 
 of bread stuffs would not have taken place, the trader would not have been 
 ruined ; the farmer would not have been subjected to loss or inconve- 
 nience ; and the poor would not have been distressed for the want of 
 bread. The case supposed, is but an example of many of a similar char- 
 acter, all tending to show the necessity of a National Bank, to protect the 
 mass of the people, as consumers, from extravagant prices and even to 
 protect the reckless or imprudent speculator against himself. 
 
 There may be other Banking Institutions, though few in number, with 
 which there is a further objection to a National Bank. 
 
 As it is advantageous to every Bank to increase the number of its depos- 
 itors, so it may be desirable with any of them to become the agents of 
 government, and thereby to obtain a share of the public deposits, and a 
 share of the government circulation. 
 
 A large proportion of the State Banks are not so situated as to expect 
 these privileges ; but some may expect them, so long as there is no National 
 Institution established for this purpose. When a National Bank is in op- 
 eration, the moneys belonging to the nation, or what are called the govern- 
 ment deposits, are placed of course with that Bank, or with its Branches. 
 These Branches receiving the funds of government wherever collected, 
 and paying the debts contracted by government, wherever due, have the 
 opportunity of putting into circulation the bills of the Bank, as well as the 
 
65 
 
 advantage of discounting upon a proportion of the government deposits at 
 any time on hand. 
 
 If there be no National Bank, these public moneys, unless the hard 
 money system be adopted, will be distributed amongst certain State Banks, 
 affording them the opportunity of using the government funds, and of issu- 
 ing their own bills in payment of government debts increasing their cir- 
 culation, and augmenting their ability to lend to their particular customers. 
 The stockholders of such Banks may be benefited by the increased profits 
 of their institutions, provided this money be employed with good faith, 
 and loaned on good security. The officers will be benefited by the in- 
 creased business and greater popularity of their institutions ; affording 
 them better salaries, and procuring them greater influence with the com- 
 munity. The directors and large borrowers of these Banks will be bene- 
 fited, as they think, in proportion as the loan of these public moneys is 
 divided amongst them. It is perfectly natural for persons thus interested, 
 to be opposed to the establishment of a National Bank ; but how many 
 persons are there of this description throughout the country ? 
 
 Without a National Institution, for receiving, keeping, and paying 
 the public moneys, this charge might devolve upon one, two, or three 
 Banks in each State. We may suppose, therefore, fifty Banks to be thus 
 privileged, in the whole country. Many others may aspire to the ap- 
 pointment ; but of the whole eight hundred Banks in the United States, 
 not more than fifty can have in reality this interest at stake. To each of 
 these Banks we may allot one hundred persons officers, directors, and 
 heavy borrowers who may be supposed to divide the spoils between 
 them ; for smaller customers will scarcely perceive the difference, in the 
 accommodation they obtain. There are, then, five thousand persons, in 
 the whole nation, who may be supposed to have a direct interest, of the 
 kind here alluded to, in opposing the establishment of a National Bank. 
 These persons will maintain that a Government Bank, or a Fiscal Agent, 
 of any kind, is unnecessary. Their Banks can keep the government de- 
 posits, and receive and pay out the public moneys ; and they will do it 
 without asking a compensation ? These persons may be loud talkers, and 
 stirring politicians, because their private interests excite them to action. 
 But what is the interest of these five thousand persons, or even fifty 
 thousand, if there were so many, in comparison with the opposite interest 
 of the seventeen millions constituting the whole population of the country. 
 
 As to the stockholders of these fifty Banks, experience, as well as 
 common sense, shows us that wherever, and whenever, a Bank has a 
 larger amount of money to loan out, than its position in the community 
 renders expedient, extraordinary hazards are incured ; and it is the stock- 
 holders who have to take these hazards. Where a local Bank has a large 
 amount of public moneys to loan out, its bad debts more than equal the 
 extra amount of interest collected. The interest of the permanent stock- 
 holder is, therefore, decidedly opposed to the enjoyment of any extraor- 
 dinary powers on the part of the conductors of his institution : for his 
 whole investment may be swept away, or nearly so, by the too great fa- 
 cility with which borrowers are accommodated.* 
 
 * We say the permanent stockholder, because, as to the mere contractor to buy 
 or sell stocks, it may be as much for his interests at one time to ruin an institution, 
 as at another to promote its success. He contracts to deliver stock at some future 
 period at a certain price, it is then desirable for him to injure the institution, in its 
 circumstances, in its character, or both, in order that within the appointed time he 
 9 
 
66 
 
 There may be other Banks in some parts of the country, having sus- 
 pended specie payments, without a prospect of ever being able to resume 
 them, which enjoy a credit from the mere circumstance that, as none of 
 the surrounding Banks pay specie, the difference between those having 
 means, and those having none, cannot be tested. The introduction of a 
 National Bank would speedily make this difference known ; a better paper 
 currency would be introduced, to which their own circulation must give 
 place ; their deposits would be withdrawn, and their affairs would neces- 
 sarily be brought to a close. The customers of these Banks very naturally 
 argue, that if the institutions to which they are in debt are constrained to 
 close their concerns, the accommodation they have hitherto obtained must 
 cease, and they themselves must liquidate their affairs, and perhaps betray 
 their own insolvency. 
 
 On the other hand, there may be some individuals connected with spe- 
 cie paying Banks, who presume upon the superior solidity of these estab- 
 lishments calculating that the more confusion and uncertainty there is in 
 the paper currency generally, and the greater the want of confidence in 
 other institutions, the greater the advantage resulting to their own. Such 
 persons have no objection to the rigid action of a National Bank. They 
 wish to see all weaker institutions taken out of the way. The smaller 
 the number of Banks remaining, the better for them. They favor, therefore, 
 the passage of a National Bankrupt Law, to act upon all State Institutions. 
 Something that will destroy without building up something that will 
 remove one kind of competition, without substituting another in its place. 
 The proposition at the same time meeting the argument in favor of efforts 
 for a National Bank, that something must be done ; while it opposes these 
 efforts by making, what might be called in military tactics, a skilful di- 
 version. Even statesmen, from portions of the country where Banks enjoy 
 the highest credit, may make similar calculations ; but these are not cal- 
 culations for the general good. They are local and individual reasons, 
 operating either very partially, or only with the few. The question the 
 people have to consider is, how much these local and individual objections 
 are to weigh, when balanced with the interest of the whole nation. 
 
 may purchase the stock he has to deliver at a price so much lower. Such an indi- 
 vidual compasses sea and land to obtain his object, and if, perchance, he has 
 engaged in this manner to deliver the stock of a National Institution, however con- 
 vinced he may be that its existence is essential to the welfare of the country, he will 
 join any party in destroying it, in order to make a few thousand dollars upon his 
 contract, and this object being accomplished he must afterwards maintain his repre- 
 sentations with pertinacity in order to justify the course pursued. Certainly the in- 
 terests of such persons are not to be taken into consideration in weighing the ad- 
 vantages to the country of a National Bank. 
 
 NOTE. Amongst other objections to a National Bank it has been urged that it is a 
 Monopoly, an objection already partially noticed, [Sect. V. Part II.] 
 
 The only view in which it can be thus considered, is that of its being the deposi- 
 tory of the public moneys, and its acting as the Fiscal Agent of the government, in 
 which capacity it may be said to monopolize the advantages incident to the dis- 
 charge of its peculiar functions. 
 
 In this respect the National Treasury may be called a monopoly, for the Bank is 
 only the agent of the treasury, with the difference that by means of its numerous 
 Branches it diffuses the use of the public funds over the whole union ; while it 
 guarantees the treasury from any loss resulting from their employment. 
 
 The opposite of a monopoly is sometimes equally participated in by all. To avoid any 
 monopoly of the advantages in question, the use of the public moneys must be equally 
 divided amongst all the citizens. For if any number of these citizens less than the 
 
67 
 
 whole, enjoy the privilege of paying and receiving the public funds, this number 
 must possess a monopoly. But the state Banks say " This is absurd we ought to be 
 the depositories of the government money." In that case the state Banks will pos- 
 sess a monopoly ; and as there are eight hundred or one thousand of these Banks, 
 they must all enjoy an equal share of the public moneys, or else there will be a mo- 
 nopoly by some, not enjoyed by the others. Is the use of the public treasure then 
 to be divided amongst these eight hundred or one thousand Banks 1 This again, it 
 will be said, is absurd. Suppose we select two Banks in each state : making about 
 fifty state Banks, agents of the government. These fifty Banks will then enjoy a 
 monopoly of these privileges, whatever they n?ay be. In such case, will not the 
 other seven hundred and fifty Banks have reason to complain 1 A monopoly of some 
 kind, therefore, we see in the nature of things is unavoidable. The question then is 
 whether it be not better to give it to a National Bank, chartered by Congress, 
 paying a bonus to the Nation for its privileges, accountable to the nation for its 
 conduct, possessing ample capital, acting through its branches in all the states, 
 and yielding to the nation a portion of its profits than to give this monopoly to a 
 certain number of state Banks, or banking associations, paying no bonus to the 
 nation, not being accountable, or amenable, to the national government, having 
 insufficient capitals, not responsible for each other, and yielding no share of their 
 profits to the public treasury. 
 
 In the incorporation of a National Bank, the capital stock is thrown into the mar- 
 ket, free for the subscription of all, its privileges being fully made known, and any 
 one being permitted to subscribe for any amount, from one share upwards; whatever 
 the monopoly may be, all have the opportunity of coming in for a share of it, who 
 choose to do so an arrangement as near to an equal distribution of privileges to 
 every citizen as can be attained. On the other hand, if there be no such Bank in- 
 corporated, the public moneys, unless locked up in sub-treasury vaults, or something 
 of the same kind, must be distributed at the will of the President, to such Banks as 
 he may see fit to favor, thus, in fact, enabling this officer, whoever he may be, to 
 grant a monopoly to whom he pleases which, in fact, would be the result, although 
 the operation may be indirectly performed through the Treasury Department, and 
 the grant made to certain incorporated state institutions. 
 
 The use of the public moneys cannot be divided amongst all the citizens, nor 
 shared amongst al) the State Banks. It cannot be given to any number of Banks 
 without giving reason to others to complain. It cannot be left at the disposition of 
 the president, without giving him a monopoly, and thus endangering the liberties of 
 the country ; and it cannot be locked up in 'sub-treasury vaults, or in the vaults of 
 a Fiscal Agent, without the loss of so much useful capital to the nation, and'proving 
 a monopoly of the worst kind. If then, a National Bank be a monopoly, it is cer- 
 tainly less exceptionable than any other. 
 
 Let the people enquire who it is that complains of this monopoly. They will 
 not find that they themselves have any reason to make this complaint. They will 
 not find that a large majority even of the Banks, look upon the matter in this light. 
 But they may find that certain individuals, and certain Banks, are forward to cry 
 out against a National Bank, as a monopoly, because apparently it keeps, as they 
 suppose, the money of the nation from coming under their own control. 
 
 SECTION V. 
 
 Objection arising from a supposed hostility of the PEOPLE to a National 
 Bank, and to all Banks. 
 
 We have now taken a view of the several interesfs opposed to the es- 
 tablishment of Banks generally, and of a National Bank particularly. 
 
 We have seen that it is only the rich money lender, or his agent, who 
 can have a real interest opposed to the operation of Banks. The rich 
 man may naturally wish to monopolize the business of lending money : 
 and the agent may wish all borrowers to obtain the supply of their wants 
 through him. If it be found, in fact, that neither the rich man, nor the 
 agent, do object to Banks, it is because they have long since learned that 
 their opposition would be entirely useless. They, therefore, are obliged 
 to conform to the existing state of things, the one investing some of his 
 
68 
 
 spare funds in stocks ; and the other dealing in stocks, instead of dealing 
 in the lending of money. 
 
 We have seen it to be the interest of the people, especially of the labor- 
 ing and enterprising classes, and of all consumers, to promote the estab- 
 lishment of Banks, properly regulated; on account of the real capital, they 
 are capable of bringing into market ; and on account of the effect of their 
 competition in keeping down the rate of interest. On the other hand, we 
 have noticed some of the disasterous consequences of a want of this pro- 
 per regulation ; as it is exhibited in the creation, expansion, and sudden 
 dissolution of fictitious capital ; and we have seen in what manner a Na- 
 tional Bank is calculated to effect, and to maintain the regulation required, 
 so as to preserve to the country all the advantage of the local Banking 
 System, without the hazard of its abuses. 
 
 We have been thus led to search for the interests, supposed to be in op- 
 position to the establishment of a national institution apparently so de- 
 sirable. 
 
 We have seen that rich money lenders, and their agents may have the 
 same interest in opposing the establishment of a National Bank, that they 
 have had to the operation of all Banks. They want nothing to keep down 
 the interest of money, or to bring more real capital into market. 
 
 We have seen that dealers in Bank bills, and in domestic exchan- 
 ges, do not want a national institution ; either to bring all these bills to a 
 specie standard, or to bring the exchanges as near as possible to a level. 
 
 We have seen that the state Banks may be opposed to the establish- 
 ment of a National Bank of discount with Branches : 
 
 1st. On the general ground, that it is not for their interest to have such 
 an institution coming into competition with them. 
 
 2nd. That many of them may be opposed to any measure restricting 
 their own issues, and limiting their operations. 
 
 3d. That some of them may have the expectation of being themselves 
 the agents of government, and of having the use of the public moneys, so 
 long as no National Bank is incorporated. 
 
 4th. That some of them may be actually insolvent, and if so, they may 
 object to a National Bank, because its operations will tend to lead them 
 to a more speedy liquidation of their affairs. 
 
 5th. That others enjoying a reputation for superior solidity, may be 
 said to reap a harvest from the want of confidence under which more 
 feeble institutions are laboring. 
 
 We have seen that, of these State Banks, the officers, directors, stock- 
 holders, and many of the customers may all be supposed to have a com- 
 mon interest, connected with that of their respective corporations, in op- 
 posing the establishment of a National Bank. Many of them having 
 really no objection to such an institution, provided its powers be restricted 
 in that particular, which may have a bearing upon their respective con- 
 cerns ; while others, secretly opposed to such an establishment, on ac- 
 count of its interference with their speculations, and its apprehended di- 
 munition of their property : in theory at last, admit the necessity of a Na- 
 tional Bank for the public welfare ; and content themselves with throwing 
 only such obstacles in the way as may preclude, for the present, the pos- 
 sibility of its going into effective operation.* 
 
 * There are many individuals' who do not openly oppose the establishment of a 
 National Banking Institution, but their influence is employed to defeat every mea- 
 sure calculated to give effect to its operation. They are advocates for such an act 
 
69 
 
 In all this examination, there has not appeared a single objection, either 
 to the establishment of state Banks, properly regulated, or to that of a Na- 
 tional Bank, properly incorporated, which can be traced to the interest of 
 the people that is, to the interest of the mass of the whole nation ; nor 
 does the examination itself suggest the possibility of such an objec- 
 tion. On the contrary the laborer, the mechanic, the small trader, the 
 artizan, the farmer, the manufacturer, the merchant, all of small capi- 
 tal, and the whole multitude of consumers, have a direct and impera- 
 tive interest in favor of State Banks, and of a National Bank, and of a 
 National Bank especially, in order that the State Banks themselves 
 may be regulated and sustained ; that all their usefulness may be preser- 
 ved to the community, while the evils attending any abuse of their powers 
 are properly guarded against. 
 
 How then is it, that, for the past few years, a certain opposition to Banks 
 generally, and to a National Bank in particular, is supposed to have been 
 made by the People of the United States ? The people of a country, the 
 circumstances of which call more particularly for the aid of these institu- 
 tions, and to the circumstances of which this aid is more peculiarly adapt- 
 ed than it is to those of any other country ? How is it that this opposi- 
 tion has been supposed to be popular ? What interest have the laboring 
 classes in this opposition ? How is it that a National Bank, and that even 
 all Banks, have been decried, by those who profess themselves the mouth- 
 piece of the people ? How is this, when of all institutions, Banks are 
 most decidedly of a democratic character ; and of all Banks, a National 
 Bank has more claims for popularity on the poor, than on the rich ; upon 
 the industrious and enterprising operative, than upon the large capitalist, 
 and great money operator, or ambitious speculator. 
 
 To explain this mystery, for such it is, we must suppose a case, by way 
 of illustration. 
 
 We suppose then a state of things, in which there are three or four hun- 
 dred State Banks scattered over the United States, we suppose at the same 
 time a National Bank of discount and deposit, with Branches in the 
 
 of incorporation as will either nullify the powers of the proposed Bank, as will so 
 strip it of privileges, as to prevent the subscription to the stock necessary to carry 
 it into operation. From those who possess, or hope to possess, the use of the pub- 
 lic deposits, and the advantages of the government circulation, there is no quarter 
 to be expected. They object even to the establishment of a Fiscal Agent, as much as 
 they do to a sub-treasury system. Others, having no expectations of this kind, ad- 
 mit, as a matter of theory, the necessity of a National Bank, provided it be strictly 
 a Government Bank as they term it, confined to the duty of receiving, holding, and 
 paying out the Government moneys. For then it can act no more than a sub-treas- 
 ury system upon the paper circulation of the country. Or, they will not object to 
 a Government Bank, provided it be not allowed to discount notes, because in such 
 cases it will obtain no private deposits, and will issue its bills only in payment of 
 government debts : which bills it must soon receive back again in payment of gov- 
 ernment dues. It will then neither come into competition with other Banks, nor 
 interfere with their circulation. Some are willing to have a National Bank provi- 
 ded its capital be small, because with a small capital distributed over an immense 
 country its competition with other institutions must be feeble, and its operation on 
 the currency of little importance. Others are willing to have a Bank provided it 
 has no power to establish Branches ; because they trust to the legislatures of their 
 own States, to exclude those branches from sections, where, perhaps, they are most 
 needed, and thus exempt their own Banks from the required action of such an insti- 
 tion. Others would limit the extent of dividends, or the power of discounting, or 
 the rate to be charged on bills of exchange ; because they know that the more the 
 Bank is hampered in this respect, the less probability there is that the stock will be 
 taken up, and so long as it is not, they will be able to keep things as they are. 
 
70 
 
 several states, to be in operation ; and the exchanges between the most 
 distant points of the country, including the differences in the value of the 
 paper of these several Banks, to be brought so nearly to an equality, that 
 the greatest difference may not exceed one per cent. 
 
 We suppose these State Banks of course to be all paying specie for 
 their bills ; and the National Bank, with its Branches, so operating amongst 
 them, that no one of them can extend its issues beyond a certain limit, 
 without having the surplus of its bills brought back upon it with a demand 
 for specie. 
 
 We suppose this operation of the National Bank, tending as it must, to 
 keep the State Banks within certain limits, to prevent them from lending 
 their money so freely as they might otherwise do ; and consequently, to 
 cause occasional disappointments to their directors, and inconvenience to 
 many of their heavy borrowers. The rigid operation of such an institu- 
 tion bearing hard on some individuals, in some instances, although 
 
 " It is a wholesome rigor in the main-" 
 
 Wherever a Branch of this Bank is established, we may suppose it to 
 be looked upon by other Banks in its vicinity with no very favorable eye. 
 It is a stranger, a sort of interloper, but worse than all, a regulator, and 
 who 
 
 " 'Ere felt the halter draw 
 With good opinion of the law T f 
 
 Accordingly in such places, the Bank is an unpopular institution : not 
 with the people, or with the laboring classes, for they have nothing to do 
 with it ; but with those immediately connected with the local Banks, re- 
 stricted by it in their operations. 
 
 Wherever a Branchmay be located, too, as the Parent Board is in another 
 city, we may suppose it to be regarded as belonging to that city, rather 
 than to the place in which it operates, thus giving occasion to some local 
 invidious comparisons. At any rate, it is a competitor, and were it out of 
 the way, other Banks in the place would have more deposits, a larger share 
 of the circulation, and do a better business. 
 
 The Branch too, not only operates upon the Bank in its own vicinity, but 
 these Banks being again thus acted upon, operate upon other Banks through- 
 out the state, and throughout the surrounding country. Whatever incon- 
 venience therefore may be suffered, from the occasional wholesome and 
 proper check received by some of these Banks in their disposition to ex- 
 pand, the odium is thrown upon the National Bank. 
 
 We may suppose one of these Branches to be located in a large and pow- 
 erful state, in which there may be perhaps nearly one hundred other 
 Banks, established in the principal towns or counties. The influence of 
 these Banks may be supposed to be in proportion to the number and wealth 
 of their directors, stockholders, and customers ; and to have a powerful 
 effect in carrying any of the elections of the state. 
 
 The Branch Bank in question we suppose to be in a city, on the sea- 
 board, where a large part of the national revenue is collected. The ave- 
 rage amount of this revenue on hand, from the peculiar circumstances of 
 the time being immensely large ; and the reasoning being very natural, 
 that if there were no such Branch in the way, the advantage of the 
 whole of these public deposits would be enjoyed by some of the state 
 Banks. We may suppose some of these state Banks to have special 
 
71 
 
 reasons for expecting this peculiar favor, provided the existing National 
 Bank could be divested of its chartered privileges. In this event, the 
 efficient conductors, and heavy borrowers of these institutions, would 
 come in for an increased amount of accommodation. 
 
 Reasons of this kind operating together, render the National Bank 
 throughout the country, particularly obnoxious to a ceriain class of very 
 influential persons ; and this especially, in the city and state alluded to. 
 This class of persons we may suppose, to belong to the ruling party in 
 political matters ; and to have the advantage of possessing in a peculiar 
 manner the ear of the people. Of course their electioneering influence 
 must be of the last importance. 
 
 Suppose also, at this time, a number of persons to be resident in the 
 capital of the state ; whose position at the seat of government, together 
 with their high standing and reputation for wealth, renders them pe- 
 culiarly powerful with the executive and legislative departments. These per- 
 sons have a large interest in banking institutions, and their past success 
 encourages them to believe that they may further advance their fortunes 
 by a certain monopoly of state banking power. Accordingly, scarcely a 
 charter for a moneyed institution is to be obtained without their consent, 
 while the control they have over numbers of state institutions, from the 
 influence they are supposed to possess at the seat of state government, 
 enables them to perform a very important part in promoting the designs of 
 any candidate for political preferment. The interest of these persons, and 
 of their friends, in local Banks, in different parts of the state, and their de- 
 sire to give the operations of their institutions free scope, begets in them 
 a sort of hostility to the existence of a National Bank ; as well on ac- 
 count of its regulating action on other Banks, as on account of its enjoy- 
 ing the use of the public moneys, which, but for this circumstance, might 
 be elsewhere distributed. These persons have accordingly an object to 
 accomplish, in return for which, they have a political influence to give. 
 The same views, and the same circumstances, operating in a similar man- 
 ner in other parts of the country. 
 
 We now suppose in this state, and at this period, an individual to have 
 made his appearance, of considerable talent, and of great ambition. He 
 has already distinguished himself in the councils of the state of which he 
 is a native. He is a Senator : but he aims at becoming the chief magis- 
 trate of the commonwealth, and subsequently of the whole union. An 
 honorable ambition. An object, perfectly unexceptionable, provided the 
 mode of its attainment be equally so. This person has also his purpose 
 to obtain ; and his influence to give in return, for the services he may 
 require. 
 
 The continued operation of a National Bank, and even the enjoyment 
 of its existing chartered rights, depending, from a coincidence of circum- 
 stances in a great measure upon the course pursued by this distinguished 
 individual, in respect to it. 
 
 These two parties may be supposed to meet. The object of one, is 
 the attainment of wealth, through a combination of banking operations ; 
 that of the other, is the attainment of the highest honor in the gift of the 
 people. The purpose of one party is to remove an obstacle to the un- 
 limited action of its banking operations, and to obtain for its Banks the 
 use of a portion of the public moneys. The purpose of the other, is to 
 make use of the local banking interests and influence, to secure the grati- 
 fication of ceriain political ambition. In other words, the wish of the 
 
72 
 
 first, is to put down the existing United States Bank, and to prevent the 
 incorporation of any other like institution. The design of the last, is to 
 gain possession of the Presidental chair, by making electioneering capital 
 of this local and individual opposition to a National Bank. 
 
 When two such interests call for co-operation, an understanding is soon 
 brought about. Accordingly we may suppose it to be agreed, on the part 
 of the candidate for the presidency, that every effort shall be made to de- 
 prive the existing United States Bank, as far as possible, of its privileges, 
 and to oppose the continuance of such a corporation. On the other part, 
 that every effort shall be made to elevate this distinguished individual in 
 public office, until he arrives at the highly honorable position to which he 
 aspires. 
 
 The plan is a feasible one. The same reasons, making the removal of 
 the National Bank desirable with the State Banks of one section of the 
 country, making it equally so with those of other sections. The putting 
 down of the UNITED STATES BANK, being popular with certain State Banks. 
 These institutions, through their most active conductors, operate upon the 
 mind of their customers, while the customers severally operate upon the 
 minds of those dependent upon them, or with whom they have more or 
 less interchange of sentiment. The borrowers of local Banks, being told 
 that they cannot obtain all they ask for, on account of the operations of 
 the National Bank, are easily led to look upon this institution as the 
 greatest obstacle to their prosperity. They regard it as a monster. They 
 describe it as such, to those around them. They invoke the aid of their 
 friends and acquaintance, to put down the monster; and multitudes, having 
 themselves nothing to do with Banks, are led to believe from these rep- 
 resentations, that the existing National Bank is indeed something of a 
 peculiarly destructive character ; and that any other institution of the kind 
 must be equally so. The public mind is thus brought into a state of in- 
 flamability, under an impression of the existence of some inconvenience 
 of which the people in fact have never been in the slightest degree sensi- 
 ble. The whole spirit of hostility originating with comparatively a small 
 number of persons, having a particular pecuniary interest at stake. 
 
 A point, however, is gained. A watchword is created ; a powerful 
 party is wrought upon to adopt this watchword ; and the people the la- 
 boring classes are persuaded that their interests have been studied in the 
 whole matter. The downfall of a National Bank now becomes popular with 
 two very different classes at once. With certain bank directors and rich 
 men, because the institution is supposed to interfere with their moneyed 
 concerns ; and with a portion of the laboring classes, and even of the 
 poor, because this measure is supposed to promote the success of the po- 
 litical party to which they are attached. The people having been per- 
 suaded to believe this, by the very bank directors and rich men who have 
 planned the whole campaign for their private purposes. 
 
 Opposition to a National Bank being now the measure of a party, there 
 is a mutual action and reaction in favor of it. The watchword sustains the 
 party, and the party sustains the watchword ; and adopted, as it is, it now 
 becomes the railway upon which the Presidential candidate alluded to, is 
 to hazard his career. 
 
 Some difficulties, however, remain to be removed. There is still a 
 very general persuasion in the public mind, that without a National Bank, 
 the bills issued by the several State Banks will be so rapidly multiplied, 
 as unavoidably to be followed by a depreciation of their value that the 
 
73 I 
 
 issues of some Banks will become so large as to render the holi 
 their paper unsafe for the public, and in case of their insolvency, tot 
 an undesirable odium upon the reputed instruments of the generl 
 lamity. 
 
 To meet this difficulty, a friend of the Governor's (for the fortunate 
 Senator may now be supposed to have advanced thus far in his projected 
 career) suggests the plan of obliging each of the Banks of the State to 
 contribute annually a certain amount, to meet the defalcation of any Bank 
 becoming insolvent. Able, sound, and well conducted institutions, are 
 thus to provide for the deficiency of the weak, unsound, or badly conduct- 
 ed. Banks best deserving of credit, promoting the circulation of the bills 
 of institutions least deserving of confidence ; and this, too, at the expense 
 of good Banks, which, by the same measure, lose the benefit of so much 
 circulation of their own. The injustice of the principle is evident ; but 
 the anxiety of some persons to establish new Banks, and of others, con- 
 ductors of Banks, whose charters are about to expire, to retain their posi- 
 tion, induces them to accede to the proposition. In truth, there is no 
 alternative. The measure has been resolved upon in conclave, by those 
 without whose consent neither a new act of incorporation can be obtained, 
 nor an old charter renewed. A Safety Fund is thus proposed to be introduced 
 for theoperation of a National Bank, the essential difference consistingin this, 
 that whereas the tendency of a National Bank is to restrict the operations 
 of other Banks, each, to its proper limit, in proportion to its strength, the 
 tendency of the Safety Fund is to uphold and extend the operations of the 
 institutions having least ability and credit of their own. The superior 
 ingenuity of the contrivance, however, is much lauded ; and it is even 
 seriously suggested, that if all the Banks throughout the United States, 
 would thus contribute to sustain the credit of institutions unable to sustain 
 themselves, there would be no need of a National Bank ! 
 
 Meantime the distinguished individual already alluded to, has made 
 another step in the career of political advancement. He is now, we are 
 to suppose, Vice-President of ths United States. The sphere of his in- 
 fluence is transferred from the capital of his own State, to that of the 
 whole nation. He is within a step of the object of his ambition, but the 
 most arduous part of his engagement is yet to be performed ; and his suc- 
 cess is not secure without obtaining the ear, and the good will, of the ac- 
 tual incumbent of the Presidential chair. The popularity of this incum- 
 bent, at the same time, being so great as almost to confer upon him, in 
 effect, the nomination of a successor. 
 
 Here are two objects to be attained. The Anti-National Bank party is 
 to be satisfied, and the favor of the ruling Chief Magistrate is to be gained. 
 To unite these two objects, however, is not a difficult task ; part of the 
 popularity of this Chief Magistrate, amongst the advocates for the unlim- 
 ited freedom of State Banks, taking its rise from his supposed hostility to 
 this, with them, very unpopular institution. 
 
 The President we may suppose to be a man far advanced in age, of 
 strong passions and prejudices, and of more military than financial talent; 
 one who has never been convinced of the necessity of a National Bank, 
 or of the advantage of a well balanced Banking System perhaps having 
 never entered into a practical examination of the subject. Possibly he 
 may have, too, some old grudge against the conductors of the existing 
 Bank, whose political views he believes to differ from his own. He is 
 fond of glory. The Bank is represented as a monster. The destroying 
 
 10 
 
74 
 
 of such a monster is set before him as a Herculean task a work, the 
 achievement of which will hand his name down to posterity, with the 
 same kind of renown as that gained by certain heroes of antiquity, so re- 
 markable for ridding the earth of serpents, dragons and hydras. 
 
 The jealousy of the aged chieftain, perhaps, too, may have been roused 
 by an artful suggestion of the inquiry which is the greatest man, the 
 Head of the Nation, or the Head of the National Bank? He is made to 
 believe that he ought to have the nomination of the principal officers of 
 the Branches that his influence over the institution shouldbe such as not 
 to permit of a separation of the purse and the sword ; and his wishes be- 
 ing thwarted in this respect, in one or two instances, he is persuaded that 
 the disappointment arises altogether from the personal hostility of the en- 
 emies of his glory. He is thus, as it were, by an almost magical and un- 
 seen hand, led to vow eternal hatred to the Bank ; as the child of the 
 Carthagenian was led by its parent to swear eternal enmity to the Ro- 
 mans. 
 
 The charier of the Bank is about to expire. An act renewing this 
 charter passes both Houses of Congress ; but it receives the President's 
 veto. He has Constitutional scruples against the incorporation of a Na- 
 tional Bank, at the same time he has a plan in his pocket for making one 
 after his own heart a plan of which we may suppose it to be known at 
 least, that it never could be passed by an American Legislature. This 
 opposition of the President, sustained as it may be, by the influence of 
 certain State Banks, and of those whose private interests are opposed to 
 any National Bank forbids the expectation that the institution actually 
 in operation, will be allowed a new term of existence, or that any other of 
 the kind will be permitted to go into operation. 
 
 But this is not enough ; the institution still performs its most useful and 
 important functions that of restricting and regulating the issues of other 
 Banks. The conductors of some of these Banks, finding this operation 
 more and more an obstacle to the accomplishment of their enterprizes, are 
 impatient of the restraint ; the managers of others are equally impatient, 
 for a division of the use, and perhaps of the abuse, of the large amount of 
 public money, known to be in possession, on deposit, or so coming into 
 possession, of the United States Bank. Perhaps at this juncture, the en- 
 joyment of such an advantage is the greatest crime of which the Bank is 
 considered culpable ; at any rate, by divesting it of this privilege, two 
 purposes are accomplished. Its salutary operation on other Banks is 
 crippled, and the spoils are divided among the victors. We may suppose, 
 accordingly, representations to be made to the head of the nation, that the 
 removal of the public deposits from the National Bank to certain other 
 Banks, however unjust it may be admitted to be, will be a popular measure. 
 We may suppose, for example, a letter to be written signed by some 
 twelve or fourteen bank directors of one or two of the principal seaports, 
 expressing this opinion, and purporting itself to be the voice of the people, 
 as if the people had had any thing to do, either with the letter, or with the 
 views of its signers. , 
 
 The idea of popularity thus suggested, and the reputed splendor of 
 glorification attending the destruction of a monster, induced the veteran 
 chief to take upon himself the responsibility of carrying out the views of 
 those who thus make him the instrument of their purposes. 
 
 His first step, however, is to accomplish his designs legitimately. The 
 public treasure is believed to be, as he represents it, unsafe in the Na- 
 
75 
 
 tional Bank. A friend of his own is appointed by the Treasury Depart- 
 ment, to examine into the affairs of the Bank. Contrary to expectation, 
 he reports his conviction of the soundness of the institution, and of the 
 perfect safety of the government funds. A committee of investigation is 
 appointed by Congress ; the result is the same. The public moneys are 
 pronounced to be safe, and the removal of them on the score of security 
 is necessarily relinquished. The Secretary of the Treasury is applied 
 to. He demurs at sanctioning a proceeding so much in derogation of his 
 duty as a public officer. The Cabinet are consulted. The Cabinet can- 
 not be brought into the President's views, and all the heads of depart- 
 ments having come in as a unit, are obliged to go out as a unit. A new- 
 Secretary of the Treasury being appointed, he also is called upon to re- 
 move the public moneys from the place of deposit assigned by law and 
 he, too, gives his reasons for refusing compliance with a requisition, as 
 uncalled for by the circumstances, and as unjust towards the institution, 
 as it is inconsistent with a faithful performance of his public duties. He 
 is obliged, of course, to resign. Another Secretary is appointed, and this 
 time, we may presume, with the express understanding that he is to per- 
 form the act required, right or wrong. He becomes, then, the tool of 
 arbitrary power, and is rewarded, perhaps, for his subserviency, and gross 
 violation of every principle of equity, by an appointment to the highest 
 seat in the judiciary of the nation a seat designed only for those most 
 distinguished for independence of spirit, and for a scrupulous adherence 
 to the dictates of justice. 
 
 The government moneys we may now suppose to be removed to certain 
 State Banks, replenishing the pockets and favoring the speculations of the 
 knowing ones, who have, as it were by the aid of a magician's power, or 
 a Harlequin's wand, effected this important transposition. 
 
 Here is an admitted abuse of power, to be sheltered only from the in- 
 dignation of the people, by taking refuge in the unpopularity of the party 
 wronged, and by summoning to the aid of the wrong-doer the private in- 
 terests benefited by this most egregious breach of public faith. The 
 minds of the people, therefore, especially of the laboring classes, are to be 
 prejudiced not only against the Bank, but against any National Bank. A 
 certain act of wrong is required to be done by those in power, as a con- 
 dition of being sustained themselves ; and a clamor is raised amongst the 
 people by these wrong-doers, against the injured party, in order that the 
 people may not examine into the character and causes of the acts. 
 
 The people might inquire, why the public treasure was removed from 
 the place of safety appointed by the law ; and if they did inquire, they 
 would find that it was not because their interests were consulted. They 
 might inquire, for whose benefit it was that these moneys were removed 
 to other Banks ; and if they did inquire, they would not find that it was 
 for the benefit of the people, or of the laboring classes ; or even for the 
 benefit of any very large number of citizens. They would find the whole 
 advantage gained, to be divided amongst a few of their most wealthy fel- 
 low citizens. They would not find that this removal of the deposits was 
 to benefit the poor; it could only benefit the rich. 
 
 The people might ask, too, why the United States Bank was thus dealt 
 with, or why any National Bank met with so much opposition, and they 
 would find that no reason could be furnished, with which they had any 
 concern. They might inquire amongst themselves, which of them could 
 trace any loss or inconvenience to the operations of a National Bank 
 
76 
 
 and they would not find that they had either individually, or collectively, 
 any cause of complaint. On the contrary, they would h'nd that so far as 
 their interests were concerned, they were essentially benefited by the in- 
 stitution. In a pecuniary point of view, by the sound paper currency se- 
 cured to them through the restraining power of a National Bank upon 
 other Banks and in a political point of view, by the security it afforded 
 to their liberties restraining the Executive arm of government, by its 
 separation of the power of the purse from that of the sword. 
 
 The people would find the only grounds of complaint to be those con- 
 nected with the immediate interests of comparatively a few Banks, and of 
 comparatively a very small number of individuals ; individuals, too, whose 
 circumstances were not such as to call for the aid or sympathy of the 
 nation. 
 
 To prevent the people from making these inquiries, and these discove- 
 ries, a HUE AND CRY is industriously raised against a National Bank, as if 
 the people had been already convinced that such an institution was not 
 even entitled to the protection of the laws. 
 
 But why, it may be asked, has there been & popular objection, as some 
 have represented, throughout the country, not only against a National 
 Bank, but against all Banks ? Why have the conductors of all Banks 
 been stigmatized by professed organs of the people's voice, as Bank Bar- 
 ons, and the bills of all such institutions, as Bank rags? 
 
 Since the establishment of a well-regulated Banking System is so emi- 
 nently beneficial to the people, and to the working classes, how is it they 
 have been led to believe it to be for the interest of the rich to sustain the 
 Banks, and for the interest of the poor to abolish them : and hence, to 
 consider any effort in favor of Banks, (State or National,) as a contest of 
 the rich against the poor ? How is it that the people, or any of them, 
 especially of the laboring classes, have been led to denounce the whole 
 credit system, when it is especially the poor, and not the rich, who need 
 credit, and when credit is most beneficial to the working classes, the in- 
 dustrious, and the enterprising ? 
 
 To understand this matter, we must suppose our case a little further. 
 
 We suppose, then, the object of the State Bank party, as before 
 hinted at, to be attained. The United States Bank, with its Branches, is 
 demolished. Its doom is sealed, and a guarantee is given that no other 
 is to appear in its place. It is even prematurely deprived of its peculiar 
 powers. The goverment deposits are removed, and it is no longer an 
 agent for receiving and paying the public moneys. Its conductors, and 
 its shareholders, or those who manage for them, finding no hope to remain 
 of its resuscitation, procure its conversion into a STATE INSTITUTION. It 
 ceases to operate either in regulating the issues of other Banks, or in 
 equalizing the currency. In fine, it becomes itself one of these very 
 State Banks, which need so much a National Regulator. With this dif- 
 ference, that its enormous capital, and the unusual license of its State 
 charter, make it now not only a MONSTER, but an unchained monster, 
 amongst the other moneyed institutions of the country. 
 
 The State Banks, released from their former restraint, freely issue their 
 bills. They accommodate each other, and each accommodates its partic- 
 ular circle of borrowers. Loans are made with the greatest facility, al- 
 though not always with the greatest equality or prudence. Some custom- 
 ers being much more favored than others. Money appears to be abundant ; 
 
77 
 
 and in proportion to its abundance, the demand for it increases ; prices 
 rise, and high prices require more means ; for if prices be doubled, it re- 
 quires twice the amount of capital to purchase the same quantity of mer- 
 chandize, or of produce. High prices, too, foster the spirit of speculation, 
 for the mere circumstance, that they have risen, generates the belief that 
 they will still rise. Meantime, all who have influence with the Banks, 
 use this influence to the utmost. Every director of a bank is treated with 
 liberality by his colleagues, because each of these colleagues expects to 
 require the same liberality in his turn. 
 
 But this is not equally the case with all Banks, nor in all parts of the 
 United States. In the old states there is more real capital already accumu- 
 lated ; it is more equally distributed, and there is comparatively less oppor- 
 tunity for using it to advantage. Along the Atlantic border, therefore, the 
 Banks, especially to the north and east, expand less than they do in the 
 new states. Towards the south and west, capital seems to promise 
 greater profit ; there, too, there are more of the adventurous and enterpri- 
 sing, who need capital ; and there, accordingly, the Banks are more ur- 
 gently called upon ; while different interests combine in prompting them 
 to yield more freely to the applications they receive. Where there is 
 less real capital, also, in proportion to the call for it, there is the greater 
 tendency to the creation of something fictitious, to answer the same pur- 
 pose, if it be only for a time. 
 
 In proportion to the increasing issues of the Banks, their paper money 
 depreciates. If this were uniformly the case, the change would hardly 
 be noticed ; prices would be said to rise ; when, in fact, it is only that 
 which represents value, which has depreciated. The Banks, however, 
 being more liberal in some portions of the country than in others, we see 
 that one paper dollar in one state, will not do so much as another paper 
 dollar will do in another state ; and we then begin to detect the deprecia- 
 tion in the value of the Bank bill. Some Banks having issued more bills, 
 in proportion to the real capital represented, than they should have done, 
 the consequence is, that each of these bills represents less real capital than 
 it professes to represent. And the Banks in some states or sections of the 
 country, having been led to pursue this course more than they have in 
 others, the consequence of this, also, is that the paper currency of some 
 sections of the country, differ in value from that of other sections, a 
 dollar bill of the Banks of one state, being really worth one hundred 
 cents, in hard money ; while that of the Banks in another state, may 
 really be worth only ninety cents, hard money. Hence, if the govern- 
 ment collect the public revenue, or the payment of the public lands, in 
 the paper currency of some states, it must lose the difference arising 
 from the depreciation of this currency, when it pays its own debts in 
 other states. Besides, as there is no legal tender of payment except gold 
 or silver, even the United States government cannot oblige any one, in 
 any of the states, to receive payment for services, or claims, in anything 
 but gold or silver. While, then, it might collect its dues in the deprecia- 
 ted Bank paper of a certain state, it would be under the necessity of pay- 
 ing even members of Congress from that state, as well as other public 
 functionaries, in hard money. Not only this ; if the citizens of some 
 states may pay their duties, or pay for their lands, in the depreciated paper 
 currency of their section of the country, while the citizens of others are 
 paying the same dues in bank paper, equal to specie, the public burdens 
 
78 
 
 are not equally distributed. The requisition of the Constitution that duties 
 and taxes shall be equal in all the states, will not be complied with. 
 
 What is to be done ? This derangement, and this difficulty, evidently 
 arises from the want of a NATIONAL BANK. It will not do to confess the 
 error ; still less will it do to disappoint the expectations of those to whom 
 the pledge is supposed to have been given, that no National Bank shall be 
 allowed to exist. The only course to be pursued to save the treasury, and 
 to equalize the public burdens, is to require the payment of all duties and 
 purchases of lands, in hard money. 
 
 Here, again, is another difficulty. When the hard money is received, 
 how is it to be kept distinct and seperate from the paper money with which 
 it is surrounded ? The silver and gold of the nation cannot be deposited 
 in the Banks, for then the depreciated paper of the Banks might be paid 
 out in return for it ; and if Banks cannot be trusted to pay their own bills 
 in specie, how can they be trusted with returning the government specie 
 for specie, when called upon ? Or how can they be expected to pay the 
 checks of the government in silver and gold, when they cannot pay their 
 own debts in any thing but depreciated paper. 
 
 In those parts of the country where the bills of the Banks have not 
 depreciated, these questions may not be agitated ; but if the funds of the 
 government are deposited in the Banks of some of the states, and not in 
 those of other States, here is a new cause of complaint, and a new ground 
 for sectional jealousy. On the other hand, if the silver and gold of gov- 
 ernment be left in Banks, which pay out only their own depreciated pa- 
 per, then these Banks enjoy an advantage of which other Banks are de- 
 prived, for they may buy up their own bills, at a discount, with the very- 
 specie funds which the government has extorted from citizens to deposit 
 with them. 
 
 With the hard money system, then, what may be called a sub-treasury 
 system, must be introduced. Government moneys, and government re- 
 ceipts and payments, must be separated ; must be preserved from the 
 contamination incident to mingling with the currency of the nation. The 
 public dues must be collected in gold and silver in all the states, and when 
 collected they must be kept in vaults and safes, also in gold and silver, 
 till they are paid out in coin. 
 
 Here is a change of system evidently to be attended with great pecu- 
 niary loss, and inconvenience to the country. The withdrawal of gov- 
 ernment funds from all banks is a withdrawal of so many millions of real 
 capital from daily use ; and the receipts and payments of government 
 being altogether in gold and silver, there is here further withdrawal of 
 so many millions of real capital to be derived from this circulation, which 
 might be also in daily use, if these receipts arid payments were made in 
 Bank paper; leaving the gold and silver to be employed for the purposes 
 of trade. That such a measure should be unpopular with all of the 
 Banks, and with all connected with them, was to be anticipated. That 
 it should be so, especially with those Banks, or their conductors, who had 
 been encouraged to look upon the public deposits, and the government 
 agency, as part of the spoils of victory, for which they had labored, and 
 to which they were entitled, is not to be wondered at. How, then, is 
 such a course to be justified, defended, palliated ? How are those who 
 adopt it, to be shielded from the odium to which they must be inevitably 
 exposed 1 Especially, how is this to be done without a confession of 
 past errors ? 
 
79 
 
 The same step must be again taken as on the former occasion. The 
 party aggrieved, must be misrepresented in the public eye. Popular pre- 
 judices must be excited against all Banks ; all advocates of Banks must 
 be denounced ; and all Bank bills must be spoken of as " rags," mere 
 rags. All efforts to obtain a wholesome Banking System must be again 
 represented as a contest of the rich against the poor. It is thus attempted 
 to give a certain lone to public opinion, to silence the voice of common 
 sense. A tone which popular opinion, of itself, never could adopt ; for 
 perhaps no course could be pursued more calculated to make the rich, 
 richer, and the poor, poorer, than that which we have supposed to have 
 been so pertinaciously pursued, by those directing the efforts mad, first, 
 to the destruction of the National Bank ; and afterwards, to that of all 
 Banks. 
 
 The case we have imagined, is a difficult one indeed, for the sagacious 
 manager, who, with a skill worthy of a better cause, may be supposed to 
 have been pulling the wires of all this machinery. He has done his 
 part, the monster is destroyed, the public deposits have been removed. 
 Certain State Banks have enjoyed a monopoly of the government agency, 
 at least for a time ; certain political friends have had the use of govern- 
 ment moneys : and He too has received his reward. By the aid of those 
 who, from their connection with these state Banks, were led to yield him 
 their best services, his highest ambition has been gratified. But he is still 
 pledged to maintain the course he has pursued ; that is, he is pledged, 
 come what will, to prevent the re-existence of a National Bank. 
 
 The position however, in which he is placed, obliges him to use his 
 power against the friends to whom he owes his elevation. There is no 
 other alternative. A National Bank on the one hand, or a hard currency 
 and sub-treasury system on the other. The last operates indeed more se- 
 verely on the state Banks, than a National Bank could have done. But he 
 must go forward. The same legal advisers formerly engaged in drawing up 
 special pleas to justify a breach of public faith towards the late national 
 institution, if they are now keepers of his conscience, may as dexterous- 
 ly show him how his own plighted faith to his state Bank friends may 
 be preserved, while he is aiming a most fatal blow at their prosperity. They 
 may show him, how a pledge to destroy the adversary of his friend, does 
 not prevent him from destroying the friend also. His scruples are over- 
 come. " He kicks the ladder down by which he had ascended," hoists 
 the sub-treasury standard, and joins in the popular cry of his own crea- 
 tion : Down with the Banks. 
 
 When the government deposits were removed, as we have supposed, 
 from the National Bank to other Banks ; and when these other Banks 
 were made, the agents of government for paying and receiving, there was 
 a withdrawal of so many millions of dollars from one channel of circu- 
 lation to be directed into other channels ; producing distress in one case ; 
 and superabundance, for the most part untimely, in another. This may be 
 supposed to have operated of course unfavorably, and hardly, upon the 
 customers of the National Bank, and those dependent upon them, yet af. 
 least it may have been a subject of rejoicing with the customers of the 
 other Banks. But when the hard money, and sub-treasury system is adopt- 
 ed, there is a withdrawal of so many millions, deposit and circulation, 
 from active employment altogether. No Bank has the deposits, and no 
 Bank gives out its bills in lieu of specie, in payment of public debts, conse- 
 quently, there is here an entire diminution of the capital in trade, which 
 
80 
 
 does good to no one. No one has cause of rejoicing at it, while the spasm 
 which this contraction occasions, is a cause of suffering to all. 
 
 Not only this, when a specie circular is issued by government, requiring 
 all its dues to be paid in hard money, the parties having to pay, resort im- 
 mediately to the Banks for the specie required. The Banks have re- 
 course to their customers, and the customer of the Bank falls back upon 
 all who are in debt to him. The Banks, perhaps, apprehending more 
 than they have occasion to fear, and not knowing who will pay, and who 
 may disappoint them, call for three or four times the amount absolutely 
 necessary, the borrowers of the Bank are equally alarmed, and press in 
 proportion upon all indebted to them. As the pressure increases, disap- 
 pointments, and complaints, and excuses are multiplied, and in proportion 
 to these, confidence and credit diminishes. A panic ensues, and with the 
 appearance of panic, all confidence disappears. 
 
 In the condition of unlimited extension in which we have supposed the 
 Banks all over the country to have placed themselves, in consequence of 
 their freedom from restraint ; and with the increase of their numbers 
 which may have doubled during the period in contemplation, it is easy to 
 imagine the sudden, and almost universal insolvency into which the whole 
 community must be plunged by such a panic, such loss of confidence, and 
 such general embarrassments. A state of distress follows, in which all 
 may be supposed to be convinced of the error in the administration of 
 public affairs, by which this distress has been brought about. To meet 
 the case, public opinion, or rather the opinions of a portion of the public, 
 must be wrought upon : and it is for this end, that this pretended voice of 
 the people is raised, and still continued against what are called Bank rags, 
 and Bank barons. 
 
 We have supposed the preceding circumstances, in order to account 
 for the manner in which a prejudice has been created in the minds of 
 some, both against a National Bank, and against all Banks. This preju- 
 dice is called an objection of the people. Let the people judge whether it 
 is their objection or not. Let the people judge for themselves, how near- 
 ly the circumstances detailed, resemble those which have actually taken 
 place in this country within a year. And let the laboring classes espe- 
 cially enquire, what they have gained, either by the hard money currency, 
 or by the sub-treasury system : and what objection they can now have, 
 either to a National Bank, or to a well regulated system of state Banks, 
 checked and balanced by a National Bank. 
 
 SECTION VI. 
 
 Objections arising from the management of the late United States Bank. 
 Stock speculation Fluctuations in trade Expansion and reaction. 
 
 The partial distress occasioned by the sudden rise and fall of the 
 stock of this Bank, soon after its first going into operation, in what has 
 been called " the Baltimore Speculation," is alleged in proof of the abuse 
 to which the powers of a National Bank must always be liable. 
 
 By the act of incorporation, the directors possessed the power of lend- 
 ing the money of the Bank upon the securities of its own stock. A few 
 individuals taking advantage of this circumstance, engaged in. a specu- 
 
81 
 
 lation of buying up the shares, by borrowing of the Bank itself, to the ex- 
 tent of their purchases. The higher the price quoted in the market, the 
 more money the Bank lent upon the stock ; and the more money the 
 Bank was known to lend upon this security, the higher the price rose. If 
 the Bank lent the par value, purchasers were willing to give more than 
 par. If the Bank lent twenty-five per cent, more than par, purchasers 
 would give still more. Every one calculating, that by paying the small 
 difference between what the Bank lent, and the price of the shares, he 
 should make a profit on the whole amount of his purchase. If the stock 
 rose five per cent., a thousand dollars in this way might procure him the 
 advantage of this five per cent, upon ten thousand, being a profit of five 
 hundred dollars, upon the one thousand cash investment. The speculation 
 was commenced and carried on chiefly by some of the directors of the prin- 
 cipal Branches, the Bank lending perhaps one hundred and twenty-five or 
 one hundred and thirty upon its own slock, not really worth at the time, 
 one hundred. If the Bank, however, lent so much, other persons would 
 lend still more. Some, because they really thought the securities good, 
 and others, because they wished to produce a certain effect upon the mar- 
 ket. Private lenders, however, generally required some individual secu- 
 rity besides the stock, to guard against a fall ; but the Bank lent or may 
 have been made to lend to some of its own directors on the security of 
 the stock alone. The price of the shares rose to one hundred and fifty 
 or one hundred and sixty. A few knowing ones, who sold out in time, 
 made a profit, but at length the bubble burst. The Bank in some cases 
 was left in the lurch, and sustained a heavy loss, and numbers of 
 speculators, or rather stock-jobbers, with those who hadunwearily placed 
 confidence in them, were ruined. All this however resulted from an 
 abuse of power, of which the directors of any banking institution, with 
 the same privileges, might have been guilty. Similar mismanagement hav- 
 ing indeed occurred in state institutions, as in the conspiracy cases in the 
 city of New York, some years since. The difference being only this, 
 that as the capital of the Bank was very large, these speculations were 
 large, and the disasterous result in the same proportion. The whole, how- 
 ever, of this misconduct, with its consequences, might have been provi- 
 ded against, by a clause in the act of incorporation, now common in the 
 charters of our state Banks, prohibiting the institution from lending upon 
 the security of its own stock; at least from lending beyond a certain pro- 
 portion of its par value. 
 
 In the getting up of moneyed institutions, there are always certain per- 
 sons, who take shares, and seek to become directors, for no other purpose 
 than that of speculating upon the rise of the stock. These knowing ones 
 subscribe talk much of the immense advantages of the institution pro- 
 cure the insertion of newspaper paragraphs, to the same etTect ; and hav- 
 ing created an imaginary value, sell out, resign, and care no more about 
 the matter, except to pocket their differences. This perhaps they have a 
 right to do, but the institution itself should not be made to become a party 
 to their operations ; and to provide against this, must be the care of legis- 
 lators, in drafting the statute by which the Bank is incorporated. 
 
 The fluctuations in trade, during the twenty years term of the Bank, 
 have also, by some, been charged to the management of its conductors. 
 Very few however, urge this objection seriously. 
 
 11 
 
82 
 
 There are certain fluctuations in trade, and in the money market, neces- 
 sarily arising, as it is easy to perceive from the nature of things. 
 
 The manufacturer having sold his years' stock of goods to advantage, 
 is encouraged next year, to manufacture a greater quantity. His neighbor 
 does the same, for he has done equally well. The two have no under- 
 standing together, as to the increase about to be made by each. Mem- 
 bers of any and every branch of trade may combine to restrict each other 
 as to price ; but they never restrict each other as to the quantity to be 
 produced. The farmer may bind himself not to sell his wheat for less 
 than he did the previous year : but he will not agree that his land shall 
 not yield more wheat next year than it did the last. What is true of these 
 persons, is equally true of all others. All having done well one year, are 
 encouraged to manufacture or produce more next year, consequently this 
 next year, there may be more goods than are wanted, and it is a losing year. 
 All are now discouraged, and all again restrict their operations. And as 
 manufacturers restrict their operations, the raw material, brought forward 
 to meet their expected wants, proves to be too abundant. Thence fol- 
 lows a losing season for producers. So it is with communities, or nations. 
 Three, four, or five years of good business, lead to a too rapid increase 
 of engagements, on one hand, and of production on the other. The sup- 
 ply exceeds the demand, or the ability to remunerate, and then follows a 
 period of embarrassment. Such changes we find have occurred in this 
 country every five, six, or seven years. When they do occur, corres- 
 ponding fluctuations take place in the money market. The pressure for 
 money, however, or the want of this pressure, is the effect, and not the 
 cause of these fluctuations in trade. The operations of a National Bank 
 are no more chargeable with these changes, than the rise and fall of the 
 mercury in the thermometer are chargeable with the changes of the wea- 
 ther. These fluctuations would have taken place had there been no United 
 Stales Bank in existence ; and the probability is, that the action and reaction 
 would have been much greater, if, during the same period, the state Banks 
 had not been checked in their issues, and in their disposition to expand, 
 by the regular and inflexible action of a National Bank. 
 
 When the charter of the late United States Bank was about expiring, 
 and the conductors of the institution were anxious to obtain a renewal of 
 its privileges, they may well be supposed to have pursued a course calcu- 
 lated to render the corporation popular with the commercial public. They 
 could not do otherwise. At such a time, it was to be expected that they 
 would make their greatest efforts to accommodate all applying to them for 
 aid, in order to furnish as little ground of complaint as possible. But, 
 with all this disposition on the part of officers, and directors, the Bank 
 could not go beyond its proper limits. It was obliged to retain a certain 
 amount of specie in its vaults ; and was obliged to hold itself prepared for 
 any demand made upon it. And this especially, with the knowledge that 
 there were not wanting, those who were ready to put its strength to the 
 test whenever an opportunity presented itself. Probably to the borrowers 
 of the Bank, its liberality did not appear equal to their wants. Others, 
 however, opposed to the institution, complain that it did at this time 
 enlarge its issues beyond measure ; and that it lent one year, some mil- 
 ilions more than it had ever done before. This being put forth as an ob- 
 jection : the power of such a corporation, enabling it, they say, to make 
 
83 
 
 money scarce, or plenty, according as it may be expedient to influence the 
 public mind for political or party purposes. 
 
 In reply to this objection, let us bear in mind that the proper business 
 of a Bank being that of lending money, it is the direct, and imperative duty 
 of its conductors, to keep every dollar of its available means employed, 
 drawing interest as far as possible. The Bank ought to lend always as 
 much as it can lend, and it can at no time do more. It would be absurd 
 to suppose, that such an institution would keep several millions of dollars 
 idle for a certain period, in order to make money scarce : and it is equal- 
 ly absurd to suppose that having lent to the extent of its ability, it could 
 go still further in order to make money plenty. 
 
 Accordingly, if there were any time, when the directors of the late 
 National Bank lent more than they did at another, it was not because their 
 disposition to lend was greater ; but because more was called for. If 
 they lent less than their means, it was because less was called for : the 
 opportunities for using money advantageously, not being so great or so nu- 
 merous. It is to be remembered, too, that money is not always most 
 plenty, when the Banks lend most. More money may then be called for, 
 and obtained, from the Banks, because the prospects of profit are more 
 encouraging. In such times, directors and others, who have most influ- 
 ence with their respective institutions, borrow all they can. Those who 
 do not occupy the same favorable position will not be able to borrow so 
 easily. The discount line of the Banks may then be larger than usual, 
 while money with a certain class of borrowers, is much scarcer; and the 
 rate of interest in the market much higher. So when a Bank lends less, 
 it may be because privileged persons care less about borrowing. Others 
 who have no particular influence with the institution, then borrow more 
 easily ; and money is said to be plenty, although the discount line of the 
 Bank may be less than usual. 
 
 Whatever the disposition of the conductors of the late National Bank 
 might have been they could not scatter its money amongst the voters at 
 the polls, or amongst the people individually. Neither could they so 
 order the circumstances of any, as to make them desirous of borrowing. 
 The several Branches could only lend to those who asked ; and those who 
 asked, were only those who thought they could employ the money advan- 
 tageously ; and those who thought this, were led to it, at the period in 
 question, by the peculiarly prosperous appearance of the times; prompting 
 every one, as it did, to think that what was purchased one month, could 
 certainly be sold the next at a profit. 
 
 Whatever the expansion of the United Sates Bank may have been at 
 this time, however, it was no more than in proportion to that of all the 
 state Banks. If the Bank lent twenty millions more than it had done at 
 any previous time, this twenty millions was to be divided amongst twenty- 
 six different states ; and was after all equal only to about four or five per 
 cent, of the whole amount loaned by all the Banks together. The great 
 rise in prices at this peiiod, could not therefore have been caused by the 
 increased loans of the United States Bank ; for this would not have justi- 
 fied a rise of more than about five per cent. Neither could this expansion 
 have caused the expansion of all the other Banks ; on the contrary, it is 
 certain that the amount of state Bank loans would have been much more 
 increased than it was, if there had been no National Bank in operation : 
 the operation of the United States Bank on the other Banks, in the na- 
 ture of the case, unavoidably tending to check the spirit of speculation. 
 
84 
 
 In confirmation of this, we find that no sooner was this national institu- 
 tion taken out of the way, than the State Banks generally multiplied their 
 loans, and were themselves multiplied in number, till the increase in the 
 amount of Bank loans instead of twenty millions, was upwards of two 
 hundred millions of dollars. The Banks in the meantime having nearly 
 doubled in number.* 
 
 What then were the circumstances leading the United States Bank, as 
 well as the state Banks, to augment its loans, about the time of its apply- 
 ing for the renewal of its charter ? What led the customers of the Bank 
 to call for an increased amount of discounts ? As the expansion of the 
 Bank was not the cause, but the effect of a spirit of speculation, from 
 which the call for this expansion originated, what were the circumstances 
 giving birth to this spirit ; and by which it was particularly fostered at 
 this period ? 
 
 We have already noticed, that there always have been, and will be fluc- 
 tuations in the demand for money, as in the demand for goods ; proceed- 
 ing from what may. be called ordinary or natural causes. But there are 
 also at times, extraordinary or artificial causes, combining with the ordinary, 
 increasing the demand for money, and so increasing the discounts of the 
 Banks. 
 
 For some years previous to the period under consideration, the circum- 
 stances of the country had been unusually prosperous. The currency 
 was well regulated ; the domestic exchanges were almost upon a level ; 
 the moneyed institutions of all the states, bore a character of almost un- 
 questioned stability; and private credit was rarely impeached. The 
 profits of capital had been liberal and regular ; the inducements to borrow 
 from the Banks, not from want, but from the prospect of pecuniary advan- 
 tage, were sufficient to occasion a gradual increase of the demand for 
 loans. Bank facilities were desirable ; Bank capital was reasonably 
 profitable ; and its safety beyond suspicion. The public treasury was 
 overflowing ; and although there was a considerable amount of the Na- 
 tional Debt unpaid, there were abundant means not only to pay the inter- 
 est, but a great part of the principal. It was at the same time regarded 
 by the capitalist as an eligible investment of his money, and the prospect 
 of its being speedily paid off, was, with the holders, rather a subject of 
 regret. 
 
 About this time, the destruction of the power of the United States 
 Bank, to which we have before alluded, was determined upon, by certain 
 parties having a peculiar interest in accomplishing this most injudicious 
 
 * By a report of the Secretary of the Treasury, of 3d of March, 1841, it appears 
 that between the years, 1834 and 1836, while the United States Bank was closing its 
 concerns, more than two hundred new state Banks went into operation. During ihe 
 same period, the augmentation of the Joans of all the state Banks together, was 
 equal to two hundred millions of dollars ; or about one hundred percent, on the 
 whole amount of loans and discounts of 1830, when a National Bank was in full 
 operation. 
 
 In 1830, including the issues of the United States Bank, the amount of circulation 
 was forty millions more than the specie in the Bank vaults. In 1837, without the 
 United States Bank, the circulation was one hundred and four millions more than 
 the specie in the vaults. 
 
 In 1830, the amount of bills out, and deposits in all the banks, was less than one 
 hundred and sixteen millions. In 1837, the amounts of bills out, and deposits was 
 something more than two hundred and seventy-six millions; no National Bank 
 being then in operation. This estimate too being exclusive of banks and institutions 
 with banking privileges, which at that time had not reported to the Treasury De- 
 partment. 
 
85 
 
 measure.* Amongst other difficulties in the way of the project, was the 
 circumstance that the Bank performed for government, the functions of a 
 Loan Office ; paying the interest of the public debt, at such points as were 
 required, free of expense ; this being one of the conditions upon which 
 it was entitled to the use of the public moneys. 
 
 The immediate paying off of the public debt would, therefore, accom- 
 plish two purposes. It would suddenly deprive the Bank of a large por- 
 tion of the government deposits, and thus diminish its ability to act as a 
 check upon the local Banks ; and it would meet the argument in favor of 
 sustaining the institution, and continuing its privileges, derived from its 
 performance of these Loan Office duties. 
 
 To accomplish this object, the chief magistrate of the nation was to be 
 persuaded, that this measure, also, would particularly redound to his per- 
 sonal glory. 
 
 Whether the funds to meet the amount of the debt had accumulated, 
 or not, under a previous administration ; or whether this accumulation 
 were the result, or riot, of past years of national prosperity, was a matter 
 of indifference ; the glorification was to consist in the fact that the whole 
 remainder of the national debt was paid during the term of the then ruling 
 president. 
 
 The argument, of course, was sufficient, and the step was determined 
 upon. The knowing ones were apprized of the purposes of the adminis- 
 tration. All the national stocks then below par were bought up ; and the 
 government soon afier paid off the whole at the highest possible rate. 
 Stocks paying an interest only of three per cent, per annum, and selling 
 at eighty or eighty-five per cent, being paid off at the full rate of one hun- 
 dred. The opposers of the Bank gained their point ; rich men became 
 richer ; the President was glorified, and the people paid the expense. 
 
 But this was not all. The contemplated paying off of this amount, 
 having been made known, speculators, or those who had the disposition to 
 speculate, naturally made the calculation, that here was a large amount of 
 capital about being withdrawn from the public funds, which those to whom 
 it belonged must be anxious to invest in something else. Hence, there 
 would be an increased demand for all objects of investment, affording a 
 chance of profit. Real estate must rise, local stocks must rise, property 
 all over the country must rise, and public lands must rise. The idea once 
 current, all who had money or credit, employed their means to the utmost 
 in purchasing lots, lands, and stocks. The national debt was paid off, 
 but the speculations, made in anticipation of the effect of this payment, 
 probably exceeded ten times the amount. Large sums were deposited in 
 different state Banks, which thus unusually supplied, lent out the amount 
 received, with more than ordinary freedom. Purchases were eagerly 
 made, and prices continued to rise ; the first speculators made money, 
 and consequently went on to make new purchases. Others, encouraged 
 by their success, followed in the same career. As prices rose, more 
 money was called for ; as it now required more capital to purchase the 
 same quantity of any kind of property. This caused a demand upon the 
 Banks for all that they could spare, and produced a proportional demand 
 upon the United States Bank ; which, especially at this crisis, could not 
 
 * The measure was particularly injudicious because it had the effect of diverting 
 
 much real sound capital (35 millions,) from its regular and wholesome channels 
 
 * circulation, either to be withdrawn altogether from the country, or to be directed 
 to unwonted channels, tending to hazardous and precarious investments. 
 
86 
 
 be more backward than others in supplying the calls of all applicants, to 
 the extent of its ability. Thus originated the much talked of expansion of 
 this institution, which was said to be for party effect, when, in fact, it was 
 but the effect of the impulse given to the spirit of speculation, by the 
 sudden payment of the whole of the national debt, in the manner, and for 
 the reasons represented. 
 
 Meantime, the ball having been set in motion, continued to roll. Spec- 
 ulation still went on, credit being yet unimpaired ; prices continued to rise, 
 and, consequently, more money was called for. Here, then, a check was 
 perceived. Not from a change in the disposition of the conductors of any 
 of the Banks, but from the nature of the case. The state Banks, as well 
 as the National Bank, had all gone to the extent of their means in real 
 capital; and while the national institution continued in operation, they 
 could not create fictitious capital to supply the demand for real. A partial 
 reaction took place, and the national Bank was charged with calling in 
 this year, instead of letting out, as it had done the year before ; whereas 
 the disposition of the officers and directors of the Bank, arid especially 
 of its several branches, could not have changed : the reaction arising 
 only from the nature of circumstances, over which they could have no 
 control ; and the whole amount called in by the Bank, being but a trifling 
 per centage upon the aggregate amount of Bank loans throughout the 
 country. 
 
 What was to be done ? More capital was wanted, and the foreign 
 stockholders of the United States Bank, being about, as was supposed, to 
 withdraw their capital from the country, so many more new Banks must 
 be incorporated to supply the deficiency ; and as almost every new Bank 
 seemed to suppose itself called upon to supply the place of the late Na- 
 tional Bank, they must each have adequate means. Banking institutions 
 are accordingly incorporated, with capitals, not merely of one to five mil- 
 lions of dollars, but with liberty to increase to fifty millions ; as if to as- 
 sure the people that they should find no deficiency of Banking capital in 
 consequence of the destruction of the national institution, then just com- 
 pelled to close its concerns. To supply the new Banks with means, fic- 
 titious capital was created : the capital stocks being paid in, or secured 
 to be paid, by the hypothecation of bonds and mortgages, state stocks, 
 and the stocks of other corporations. Available means being wanted, 
 agents were employed to take these securities to Europe, and borrow as 
 much as possible upon them. Money was thus obtained. All the Banks 
 enjoyed for a season, an equal degree of credit, and their bills were issued 
 in abundance ; the management of some of them, however, being much 
 more judicious and circumspect than that of others. Meantime, the late 
 United States Bank becomes metamorphosed to a state institution ; having 
 its old capital, with a new charter, and new privileges. Its course differ- 
 ing from the other new Banks only in this, that having thirty-five millions 
 of real capital in possession, it exchanged this real capital for fictitious, 
 apparently with as little loss of time as possible. 
 
 There is now, however, no national check or regulator. The Banks 
 are multiplied, and their issues, in various forms, increased. Wild lands 
 are bought up in all parts of the country, and railroads, turnpikes, and 
 canals, are projected and commenced, to give a reputation of value to 
 these lands ; and the Banks lend their bills, bonds, and credit, on the se- 
 curity of these railroad, canal, and turnpike stocks; some of the directors 
 being themselves, perhaps, speculators in these almost newly discovered 
 
87 
 
 territories. The greater the amount of loans made in this way, the liigher 
 the supposed value of this kind of property ; and the greater, of course, 
 the supposed responsibility of those who possess it. Their credit with the 
 Banks, and the liberality of their Banks in lending them, are unbounded. 
 As fictitious capital, however, abounds, real capital disappears ; and gold 
 and silver seem to be taking refuge in other countries. To stop the emi- 
 gration of one, at least, of the precious metals, the administrators of gov- 
 ernment raise the price of gold by law. But the law cannot regulate the 
 comparative quantities of gold and silver in market, any more than it can 
 the comparative quantities of butter and cheese. As silver and gold dis- 
 appear, the Banks are charged with circulating too many small bills. Ef- 
 forts are made to prevent the issuing of Bank bills under five dollars, and 
 Banks are even encouraged to expect the favor of government, on condi- 
 tion that they issue no bills less than ten dollars. This only increases the 
 evil, for in proportion as the small bills are redeemed by the banks, so 
 much real capital is taken out of active employment. A specie circular with- 
 a demand for hard money, not from a national Bank, but from the national 
 government, at length makes its appearance. All parties are roused to a 
 sense of their condition ; professed insolvency spreads over the country ; 
 the Banks suspend specie payments, and a general explosion takes place. 
 In all this action and reaction, the late United States Bank had no con- 
 cern, except that of the experience afforded by these circumstances, and 
 by its own past history, showing that if such a National Institution had 
 continued to exist, with its accustomed operations, these transactions would 
 not, and could not, have occurred. 
 
 This will appear still more strongly, in noticing the direct effect of the 
 removal of the government deposits from the place assigned for their 
 keeping by law, to the possession of certain State Institutions, and from 
 these to others. 
 
 In the irrigation of cultivated fields, water distributed in judicious and 
 moderate quantities to different portions of the soil, affords due nourish- 
 ment to the plants and assists their growth ; but if thrown too abund- 
 antly into particular portions of land, it overwhelms, deluges and destroys 
 all around it. So State Banks, when judiciously supplied with pecuniary 
 means, act the part of irrigating channels, in furnishing capital, as it is 
 wanted, in their respective vicinities. If these Banks be suddenly pro- 
 vided with an unusual addition to their means more than their customers 
 are able to employ to advantage, and more than is required by the position 
 in which the institutions are placed this over whelming surplus is pushed 
 out wherever it can be located, wanted or not wanted, into extraordinary 
 employment. The Bank lends, for fear its money should remain unem- 
 ployed, without due regard to security ; and those who borrow, engage in 
 unaccustomed enterprizes, merely because they can do it with so much 
 facility a ground of enterprize usually leading to a disastrous result. 
 
 As was to be expected, the enormous amount of government funds on 
 hand at the time of their removal from the National Bank, was deposited, 
 or was being deposited, with those State Banks of which the conductors 
 and customers were supposed to be most favorable to the existing admin- 
 istration of government. It was reasonable to suppose that under such 
 circumstances, these funds would be distributed in loans without sufficient 
 regard to security, and too much with the view of gaining friends for the 
 political party then in power. 
 
88 
 
 Whether this apprehension were well founded or not, the jealousy by 
 which it may have been dictated, was a legitimate element of republican- 
 ism. It being the very essence of republicanism to oppose especially the 
 augmentation of Executive power. Accordingly, this position of the pub- 
 lic moneys gave rise to the passage of what is usually called the distribu- 
 tion act, as the only means of providing against the evil apprehended. A 
 remedy the more sure, inasmuch as there were collateral reasons in favor 
 of the adoption of the measure, operating with members of the legislature 
 of all parties. By this act, these funds of the National Government were 
 divided amongst the several Stales ; the consequence of which arrangement 
 was, that the amounts in, or coming into, the several Banks, favored by 
 the National Government, must, at the time appointed, be again removed 
 into other Banks, patronized by the different State Administrations. 
 
 The measure was deemed hostile to the partizans of the National ru- 
 lers, and it therefore seemed desirable with them to render it as obnoxious 
 as possible : throwing the odium of every inconvenience arising from its 
 operation, upon those from whom it originated. The State Banks them- 
 selves, or most of them, knowing the uncertain tenure by which they held 
 these funds, would have lent them out cautiously ; but they were directed 
 and urged, as it is said, by the organs of government, to lend these moneys 
 liberally, and to give to their friends all possible accommodation. This 
 undesirable supply of capital was thus hastily pushed into positions where 
 it was not wanted, leading those who were prevailed upon to borrow it t 
 into a snare, and eventually overwhelming and suffocating the unhappy 
 borrower, with the very abundance of means with which he had been so- 
 gratuitously deluged. Here, then, was an aggravating cause fomenting, 
 in the first instance, the spirit of speculation, and augmenting the bitterness 
 of the retribution with which it was speedily followed. 
 
 SECTION VII. 
 The United States Bank of Pennsylvania. 
 
 The extraordinary result of the affairs of the United States Bank of 
 Pennslyvania, the conductors of which proposed to make it a substitute for 
 a National Bank, has been represented as indicative of the unsound con- 
 dition, and mismanagement, of the late United States Bank, previously 
 under the direction of the same conductors : warranting the objection, as 
 it is urged, that the powers of any National Bank must be subject at all 
 times to similar abuse. 
 
 To judge of the weight of this objection, we must see in what the two 
 institutions are alike, and in what they differ. 
 
 The Pennsylvania Bank resembles the late National Bank, in having 
 the name and style of The United States Bank with the difference, that 
 its proper style is the United States Bank of Pennsylvania. A difference 
 by many not sufficiently noticed ; and consequently, by many, these two 
 different, and entirely distinct, institutions, have been regarded as one and 
 the same. 
 
 The Pennsylvania Bank resembles also the late National Bank, a 
 having been presided over by the person previously President of the 
 late United States Bank. It had also several of the same directors, offi- 
 cers, tellers and clerks. It had the same capital, and nearly the same 
 
89 
 
 shareholders except that the proportion of the late National Bank be- 
 longing to the Nation, was sold by the Government to this Pennsylvania 
 Institution. 
 
 As to the name or style, it is evidently a matter of little importance. A 
 Bank might assume the style of the BANK OF THE WORLD ; and yet every 
 one would know that it was no more the Bank of the whole world, than 
 any other Bank. There is a Bank in New York called the City Bank, 
 but every one knows that it is no more the Bank of the City, than any 
 other Bank in Wall street. There is another styled the State Bank, and 
 another the Bank of America ; but the first is no more supposed to be the 
 Bank of the State, than the other is the Bank of the whole American con- 
 tinent. There are other Banks in different States, styled The National 
 Bank; but it is very well known, that not one of them is a Bank of the 
 Nation, or such a National Bank as the circumstances of the country re- 
 quire. So it should be borne in mind, that the United States Bank of 
 Pennsylvania, is no more a Bank of the United States, in consequence of 
 its name, than the North American Trust and Banking Company, of New 
 York, is an institution of this northern continent, including the British 
 Provinces. 
 
 So far as the names of Banks are adopted merely for the purpose of 
 distinction, no exception can be taken. If adopted to impose upon the 
 understanding of the ignorant, in this, or in any other country, the practice 
 belongs to a class of frauds too contemptible to be noticed. In either 
 case, the giving of the name of the United States Bank, to the Pennsyl- 
 vanian institution, is no reason whatever for identifying it with the late 
 United States Bank, properly so called. 
 
 The same individual who had been president of the United States Bank, 
 became president of the United States Bank of Pennsylvania ; but he had 
 nothing in himself enabling him to carry the National character of the old 
 corporation, into the new one. He resigned his place in one institution, 
 in order to be appointed to a similar place in another. He shifted his 
 command, but, unlike the Hero of the Lakes, he could not carry his flag 
 with him. He was obliged to sail under different colors. He merely 
 acted the part of a private citizen, having his own interest in view. As 
 an officer of the old Bank, wiih a liberal salary, and occupying a highly 
 respectable position, it was desirable for him that this institution should be 
 continued in existence. Finding this to be impracticable, his next effort 
 was to procure a charter from his own State for a new Bank, with the same 
 amount of capital, and to prevail upon the stockholders of the old Bank, to 
 transfer their funds from the National to the State Institution. Possessing 
 the confidence of these stockholders, he accordingly procured their powers 
 of attorney to effect this operation, at the same time being furnished with 
 their proxies, to vote for such directors as he might see fit, which of course 
 was to be done with an eye to his own subsequent election as President 
 of this new State Bank. All this was a matter of arrangement with indi- 
 viduals, respecting their own private property, over which they only had 
 the control. 
 
 If the Legislature of Pennsylvania, in granting this new charter, acted 
 injudiciously, or imprudently, or granted too unlimited privileges, that had 
 nothing to do with the charter of the old United States Bank ; or if the 
 stockholders of the old Bank, in thus assenting to the arrangement of the 
 individual proposed to be at the head of the institution, and in thus giving 
 him their powers of attorney, misplaced their confidence, that also had 
 
 12 
 
90 
 
 nothing to do with the charter, or the character, or the merits, of the old 
 Bank. The proceeding was simply this, that the individuals holding 
 shares in the National Bank, converted their interest, by general consent, 
 into so many shares of a State Bank. 
 
 The new institution being now organized, and in operation, it remained 
 only to purchase from the Government of the United Stetes, the shares 
 held by the Nation in the old institution. This was done on terms highly 
 favorable to the country. Not. a dollar, it is believed, was lost to the 
 public Treasury in the whole of the transaction. 
 
 The United States Bank of Pennsylvania, thus becoming the proprietor 
 of all the shares of the late National Bank, became, consequently, the 
 possessor of all the assets, or property, of that institution ; and these as- 
 sets constituted its capital for subsequent operation. That is, the notes, 
 and bills, and bonds, and real estate, of the old Bank, and of all its 
 Branches, became the property of the new State Bank, and subject to its 
 management. From this time, if there was any mismanagement of this 
 property, or any misapplication of the funds resulting from the sales of it, 
 this misapplication, or mismanagement, was effected under the authority 
 of the charter of the State of Pennsylvania*, and by direction of officers 
 appointed by the stockholders of this new State Institution. 
 
 Thus we see how, with nearly the same name, or style, the same Pres- 
 ident, several of the same directors, and nearly all the same private 
 shareholders with the possession of the same assets, or property, and 
 the same amount of capital the United States Bank of Pennsylvania was, 
 and is, nevertheless, an institution entirely distinct from the late United 
 States Bank. The two institutions, so far from being mixed, or amalga- 
 mated, actually pursuing each its distinet and respective operations at the 
 same time. One under a new President, and some of its old directors, 
 closing up its affairs ; the other, with the Ex-President, and a newly or- 
 ganized Board of Directors, pursuing its course as a State institution. 
 An institution with an immense capital indeed, and what was called a 
 most liberal charter but still, merely a State institution. 
 
 We shall now see in what these two corporations differed essentially 
 from each other. 
 
 The late United States Bank was chartered by an act of Congress, ap- 
 proved by the President of the United States. The United States Bank 
 of Pennsylvania, was chartered by an act of the Legislature of that State, 
 approved by the Governor. The stockholders of the late United States 
 Bank, paid to the Nation a bonus of one million and a half of dollars, in 
 consideration of the privileges granted by its charter, the use of the public 
 deposits, and the advantages of the government circulation. The stock- 
 holders of the United States Bank of Pennsylvania, paid to that State a 
 bonus of five millions of dollars, (besides stipulating to make some heavy 
 loans for certain public improvements,) for no other privilege than that of 
 a charter giving the conductors of the company an unusual degree of 
 license. 
 
 The late National Bank possessed the power of establishing Branches 
 in any, or all, of the different States, and thus of transacting its business 
 on equal terms with other Banks, in all parts of the country. 
 
 The State Bank possessed no such power, being obliged to confine most 
 of its business to its own State ; and elsewhere acting by such agents as 
 it was able to employ, in the same manner as a private individual 
 might do. 
 
91 
 
 The National Bank possessed a capital of thirty-five millions of dollars, 
 employed by means of its Branches, in all parts of the United States. 
 Any surplus not wanted in one position, being easily transferred to another, 
 where it might be more desirable. Thus having no stagnant capital to be 
 forced into any unwarrantable employment, lest the interest upon it should 
 be lost. 
 
 The State Bank possessed the same thirty-five millions of capital at its 
 outset, but all to be employed by one Board of Directors, in one State ; 
 except such part as might be confided to distant agents. This immense 
 amount of capital for a single State Bank, (so much beyond the wants of 
 its own vicinity,) rendering it necessary for the Board to invent unusual 
 modes of investment ; and thence so much the more easily prompting to 
 loans on securities which, under other circumstances, might have been 
 rejected. 
 
 The new institution thus situated, it is easy to conceive of the tempta- 
 tion placed before its conductors controling, as they did, such an over- 
 whelming amount of capital to enter into large speculations, and engage- 
 ments, for their own account. Knowing the facility with which they 
 could supply themselves with funds, and perhaps actually considering 
 themselves to be promoting the interests confided to their care, by engag- 
 ing to pay interest for immense amounts which, but for their enterprize, 
 might remain unprofitably idle. 
 
 The late National Bank, besides its capital, from which only compara- 
 tively a small bonus was to be deducted, had the use of the government 
 deposits, as well as the use of large private deposits of individuals keeping 
 accounts with all its Branches. It had also, as agent of the government, 
 the privilege, and faculty, of circulating its notes in all the States in pay- 
 ment of public debts, which gave these notes also unusual currency for 
 other purposes. The interest on the additional available capital furnished 
 by these items, being more than sufficient to pay the expenses of the in- 
 stitution, remunerate the bonus, and leave a fair semi-annual interest for 
 the stockholders, its conductors had no occasion to resort to unusual 
 modes of investment. The legitimate business for a Bank, of lending 
 money by discounting notes, and dealing in bills of exchange, being all 
 that was required to keep the entire means of the institution employed. 
 
 The State Bank, on the contrary, had its capital diminished in the out- 
 set, by the payment of a bonus 'disproportionately large. It had further to 
 lend certain large sums at an unusual low rate of interest ; while on the 
 other hand, it had no advantage of any public deposits, or government 
 circulation : the private deposes of the Bank being confined to the cus- 
 tomers of a single ciiy, and the circulation of its bills, in the ordinary way, 
 being of a very limited character. Its expenses, therefore, were to be 
 paid out of the interest accruing from the remainder of its capital ; making 
 it evident that without resorting to some unusual operation, with a view 
 to profit, there was little^chance for the shareholders of obtaining even a 
 fair interest on the whole thirty-five millions of capital. 
 
 To make the difference more sensible, we suppose, for example, a Na- 
 tional Bank of discount, with twenty Branches, having the use of the public 
 moneys, and the use of the deposits of those who keep an account with 
 its several Branches, together with the use of the capital derived from its 
 circulation, both for government, and for ordinary purposes. Its capital 
 stock being thirty-five millions, its additional capital for lending purposes, 
 derived from the sources above mentioned, may be put down at thirty-five 
 
92 
 
 millions more, including the average amount of government deposits. It 
 would thus, doing the ordinary business oflending money, be able to obtain 
 an interest of six per cent, upon seventy millions of dollars ; equal to 
 twelve per cent, on its capital stock of thirty-five millions. Leaving 
 ample means for the payment of all expenses, and yielding a fair dividend 
 to the stockholders, without resorting to any extraordinary enterprizes. 
 
 We will now suppose a state Bank with the same capital stock of thirty- 
 five millions of dollars ; with no other deposits than those of its custom- 
 ers in one city ; and no circulation except a share of that which is com- 
 mon to all state Banks. Its additional capital, derived from these sources, 
 must evidently be very small, perhaps one or two millions of dollars. 
 After paying a bonus of five millions of dollars, it will have, therefore, 
 but about thirty-one or thirty -two millions of dollars to lend ; out of which 
 the expenses of the institution, and its agencies, are to be paid ; leaving 
 no probability of dividing more than a small interest on the whole thirty- 
 five millions of capital stock. In order then to make up for the want of 
 additional capital, and .to do something to meet expenses, the credit of the 
 Bank must be used ; and the ingenuity of its conductors must be exer- 
 cised in devising new modes of Banking. 
 
 Money may be obtained in the old countries, on good security, at the 
 rate perhaps of four per cent, per annum. At home the Bank may 
 lend it out at six per cent, per annum. We may suppose our State 
 Bank now to be involved in two opposite difficulties. Its immense capi- 
 tal is too large for its location, it can lend but a small part of it in the 
 ordinary business of Banking; and yet if it do not lend more than its 
 capital stock, it cannot give a dividend to its shareholders equal to the 
 interest. To obviate the first difficulty, the Bank goes out of ils usual 
 course, and places its moneys in state stocks, railroad, canal, and turnpike 
 stocks, and other Bank stocks ; or it lends to States, Banks, and other par- 
 ties ; taking these stocks as security. In addition to which, certain con- 
 ductors of the institution, borrow of the Bank, on security of large ship- 
 ments of produce, made, or being made, to certain ports in Europe. 
 
 All the means to be derived from the capital stock of the Bank being 
 thus employed, to meet the second difficulty, the securities thus received 
 for loans in this country, are forwarded to Europe, where a large portion 
 of the amount lent upon them, if not the whole, is reborrowed at a low 
 rate of interest ; the amount thus borrowed abroad, being remitted, or 
 drawn for, is again lent out at home, by the Bank, at the American rate 
 of interest, perhaps upon more of the same kind of securities. More of 
 these securities are again sent to Europe ; more money is borrowed on 
 them at the low rate, and being alike remitted, or drawn for, is lent out 
 again in this country, at the higher rate. All this appears a very favorable 
 operation ; the Bank, perhaps, making a profit of two per cent clear, 
 merely for placing itself between the American borrower, and the Euro- 
 pean lender. This two per cent, of course, will go far towards making 
 up any deficiency there may be in the dividends expected on the capital 
 stock, after paying expenses. 
 
 The Bank may, in this way, have lent seventy or eighty millions of dol- 
 lars, which is as much as the old National Bank could have done with all 
 its advantages. Meantime, however, the securities received by the Bank, 
 and transmitted to Europe, are becoming more and more doubtful. Some 
 of the states, perhaps, threaten to repudiate their debts ; the railways, 
 canals, and turnpikes, do not appear to be wanted, or are left unfinished, 
 for want of further means. The holders of the securities in Europe, be- 
 
93 
 
 come uneasy, and sacrifice them at half of the nominal value, to reimburse 
 the loans made. The property shipped shares a similar fate ; and yields 
 but about half the amount advanced upon it by the Bank ; which, thus 
 losing thirty or forty millions of dollars by the securities, upon which it 
 had made its loans, loses, in effect, its entire capital. The whole of this 
 disastrous result being directly traceable to the two peculiarities alluded 
 to : viz. the throwing of an overwhelming amount of capital into the 
 confined position of a single State Bank ; and the necessity, under which 
 such a Bank must labor, of doing something, out of the ordinary course 
 of its business, to compensate for the want of a proportional amount of 
 deposits, and circulation ; in order that it may pay expenses, reimburse 
 the amouut of bonus paid, and yield a fair dividend of interest to its 
 shareholders. The capital, in the case supposed, designed for twenty-six 
 states, being forced into the vaults of a single Bank ! A capital, which 
 might have been subdivided, and lent out under the direction of the conduc- 
 tors of twenty-six branches, being placed altogether at the discretion, and 
 under the management of, perhaps, a single individual ! The whole of 
 these transactions, with their unfortunate results, being the very opposite 
 of any thing which could have occurred in the management of a National 
 Bank of discount, with its proper number of branches. 
 
 Whatever the securities may have been, the very extent of the loans 
 made upon them by the United States Bank of Pennsylvania, is a proof 
 of the soundness of the condition of the National Bank, from which this 
 state institution derived its means in the first instance. It was with the 
 assets, or property, of the United States Bank, properly so called, that the 
 United States Bank of Pennsylvania, was enabled to pay its enormous 
 bonus, and to make its large loans, on the credit of state stocks. But if 
 any doubt remained upon this point, it must be amply met by referring to 
 the repeated investigations made into the condition of the institution 
 about the time of the removal of the deposits. Investigations made by an 
 adverse party, with every disposition to detect wrong, if wrong were to be 
 met with ; and yet all resulting in a report favorable to the character of 
 the institution for soundness and stability. So much so, that even when 
 the fate of the Bank was known, and the certainty of the liquidation of 
 its affairs was fully before the public, the price of the stock in the market 
 fully indicated the undiminished confidence of the shareholders ; while 
 the price, at which the government held the shares of stocks belonging to 
 the nation, was an evidence of the good opinion entertained by the con- 
 ductors of the administration themselves, of the value of the assets. 
 
 In addition to this, the late National Bank was so restricted by its char- 
 ter, that its conductors could not have fallen into the mistakes to which 
 the same individuals were subject in the management of the state institu- 
 tion. Five of the directors of the parent board were appointed by gov- 
 ernment ; certain changes were periodically to be made in the direction ; 
 no loan was to be made, even to the United States government, exceeding 
 half a million of dollars ; and no Joan to any state exceeding fifty thou- 
 sand dollars ; the Secretary of the Treasury was authorized to call for 
 statements weekly, with the right to inspect general accounts. Penalties 
 for dealing in goods not permitted, were to be enforced to three times the 
 amount : one half payable to the informer ; and penalties, for loans not 
 permitted, to three times the amount : one fifth payable to the informer. 
 The Bank was amenable to Congress, and subject to the examination of 
 committees of either branch of the Legislature. Its privileges, and its 
 
94 
 
 charter, being liable to forfeiture, for any abuse of its powers ; while in 
 Congress, it had the representatives of twenty-six states to meet as judges ; 
 all coming from districts, where other Banks, and other interests, were 
 fully disposed to prefer any well-founded accusations, against an institu- 
 tion acting so powerfully as a check upon their own operations. 
 
 The State Bank, on the contrary, enjoyed the advantage, if it may be 
 called such, of a charter, of which it was boasted that it permitted any 
 thing, and every thing. The corporation was accountable only to the 
 Legislature of its own state, of which it was a large creditor. It had 
 here, too, an interest in common with other Banks of the same state ; and 
 several important works of internal improvement were dependant upon its 
 Joans. Where the National Bank would have stood alone in petitioning 
 for exemption from penalty, in case of a suspension of specie payments, 
 this State Bank enjoyed the co-operation of all the moneyed institutions 
 around it. Accordingly, we find, that the united influence of all these 
 state institutions, and of the individuals dependant upon them, was too 
 powerful not to secure for them the immunity desired. 
 
 Here, indeed, as we have before intimated, is the peculiar advantage of 
 a National Bank, such as it should be, in its operation upon the Bank cur- 
 rency of the country ; that standing alone, with little or no hope of indul- 
 gence from the national government, it is under the necessity of being 
 rigorous towards itself ; and being so, it is unavoidably rigid in its require- 
 ments of others ; and this is the kind of rigor so indispensable, as a pre- 
 ventative, for insuring the sound and healthy condition of all the moneyed 
 institutions of the country. 
 
 So far, then, from the possibility, or probability, that the late United 
 States Bank was subject to the same mismanagement, or that any National 
 Bank could be subject to the abuse of power witnessed in the manage- 
 ment of the State Institution alluded to, as well as of many other state in- 
 stitutions, there can be no doubt, that if a National Bank, such as the 
 country had seen in operation for forty years, had continued to exist while 
 this Pennsylvania United States Bank, with other State Banks, was plung- 
 ing itself into difficulties, the abuses and mismanagement in question, 
 never would have occurred to such a lamentable extent : as every state 
 institution of the kind, imprudently conducted, would then have received 
 a timely check to its issues, arresting its hazardous proceedings at their 
 outset. 
 
 SECTION VIII. 
 
 Other Objections : want of Suitable Conductors. Banks Regulating them- 
 selves. Corrupt Influence. 
 
 It has been said, that " a National Bank is a good thing, provided an- 
 gels can be procured to conduct it." 
 
 We have seen that such an institution is much less liable to mismanage- 
 ment than a state corporation ; and we might reply to the objection, that 
 if State Banks were all under the direction of angels, such a regulator as 
 a National Bank would be unnecessary. 
 
 All state institutions, however, being under the conduct not of angels, 
 but of men, governed and stimulated by a regard to their own pecuniary 
 interests, a National Bank becomes the more necessary to counterbalance 
 
95 
 
 and provide against the abuses to which the powers of state corporations 
 are liable ; it being only those disposed to abuse these privileges, which 
 can have reason to object to the counterpoise thus provided. 
 
 Human motives being such as they are, and all moneyed institutions 
 being directed by persons having a regard mainly to their own pecuniary 
 interests, the evil, whatever it may be, resulting from these circumstances, 
 is to be remedied by a judicious balancing of the interests of one class 
 of persons with those of another. Where there is a tendency to expan- 
 sion on one side, it must be met by something which in its own nature has 
 an equal tendency to restraint. In this matter, so deeply interesting to 
 the national welfare, it is as unreasonable for those restrained to object to 
 the regulating operation of a National Bank, as it would be for the wheels 
 of a time-piece to object to the action of the pendulum. 
 
 The objection to a National Bank, that it must be governed by men, 
 and not angels, might with equal force be urged against all the institutions 
 of government. The executive, the legislative, the judicial powers, are 
 all in the hands of men, subject to the influence of selfish passions and 
 motives ; and it is for this reason, that the use of power in one department 
 is required to counterbalance its use, and to provide against its abuse in 
 another. 
 
 Kgain it is said by a certain class, as already noticed, that trade should 
 regulate itself. " Leave every Bank," they say, " to pursue its own course, 
 and suffer the consequences of its own folly ; the evil will prove its own 
 cure." 
 
 This objection might be urged with greater propriety, if, in the matter 
 of Banks, trade were left, or had been left to regulate itself in the first in- 
 stance. If Banks were not incorporated institutions. If they were not 
 creatures of legislation. If those concerned in Banks were not exempt- 
 ed from personal responsibility. If the stockholders, directors and offi- 
 cers of these corporations were liable in their persons and property. If 
 they were jointly and severally held, for all the engagements of their in- 
 stitutions, on the ordinary principles of copartnership. In such case, they 
 might perhaps, like other establishments in trade, be left to themselves ; 
 but then the peculiar advantages set forth, as arising from the invention of 
 incorporated Banks, would be lost to the people and to the country.* The 
 principle of free trade, then having been once encroached upon, by ex- 
 onerating the parties interested in a Bank, from individual liability, the 
 evils resulting from this first encroachment must be provided against by 
 some counteracting check. 
 
 Persons acting on their own responsibility, liable in their persons and 
 property, act so much the more cautiously. Release them from these conside- 
 rations of restraint, and the same individuals may conduct very differently. 
 The incorporation of moneyed institutions is attended with some evil, but 
 it is also productive of great benefit. The course of wisdom is to provide 
 against the evil that the good may be preserved. Where no ox is, the crib 
 is clean ; but much increase is by the strength of the ox. 
 
 Suppose all incorporated moneyed institutions to be left to themselves. 
 Managed as they are, by persons released from all personal liability, ex- 
 cept for technical crime, the probability is, that in a few years the confi- 
 
 * See Section III. Part I. 
 
96 
 
 dence of the public, and of the capitalist, large and small, would be en- 
 tirely withdrawn from them. Those already in existence, would use 
 themselves up, and no new ones, or comparatively none would go into ope- 
 ration. This may be called the remedy ; but this is a remedy at the ex- 
 pense of the whole subject, it is the same kind of remedy as that which 
 death brings to the suffering dyspeptic. It is as if a farmer were to kill 
 his oxen to save himself the trouble of cleansing their stalls. 
 
 The argument that trade should regulate itself, might as reasonably be 
 applied to merchants individually as to Banks. The merchant, it may be 
 said, will suffer the consequences of his own folly, and therefore he should 
 not be subject to a suit at law. In this way the whole community, as to money 
 matters, may be reduced to a state of anarchy. The shareholders of in- 
 corporated Banks, and those who have placed confidence in these institu- 
 titutions, may suffer the consequences of the folly, or of the imprudence 
 of the directors ; but these directors themselves escape, provided no 
 crime, in the eye of the law, can be alleged against them. If the Banks 
 then are left to themselves, that is, without a check upon their corporate 
 operations, the stockholders, and the public are left unprotected against 
 every thing but actual crime : the case being even worse than that, in 
 which the private trader is exempt from the course of the law.* 
 
 If instead of this, the State Banks are kept in check by the operation of 
 a National Institution, the same cause protects the innocent shareholder from 
 suffering for the weakness or incompetency of those to whose manage- 
 ment the affairs of his institution have been entrusted. Experience hav- 
 ing already taught us, that of the immense amount of losses suffered by 
 the stockholders of various State Banking corporations within a few years, 
 almost the whole amount would have been saved, had there been no lapse 
 of time during which these institutions were without the check of a Na- 
 tional Bank of discount and deposit ; and however unwelcome such a 
 check may appear to the conductors of institutions, desirous of a certain 
 latitude of proceeding, we find that in effect, it is no more unwelcome than 
 the various regulations of State Legislation substituted for it. 
 
 In the State of New York, for instance, in place of the regulating ope- 
 rations of a National Bank, all the Banks of the State are required to pay 
 a certain annual tax to meet the defalcation of any single Bank. They 
 are required to exhibit the state of their affairs periodically to commis- 
 sioners appointed by the government ; and they are required to make such 
 returns to the State Legislature at the close of every year, as not only to 
 subject them to great inconvenience ; but such as usually, to produce at 
 this period a species of collapse in all pecuniary concerns throughout the 
 State. All which was unnecessary during the existence of the late Na- 
 tional Bank, and that of its predecessor ; and would be again unnecessary 
 if a similar National Institution were again in operation. 
 
 * Such is, in some measure, the principle upon which banking associations are 
 now organized in the State of New York. The public are supposed to be protected 
 against loss from the circulation of these associations, by certain securities deposited 
 to secure the payment of their bills. But the stockholders are without any security 
 except that of the good character and ability of the managers of their property. 
 If the institution prove to be in good and able hands, all may go well, but if other- 
 wise, the stockholder loses every thing. The result of this experiment must be that 
 with some few exceptions, confidence will be withdrawn, and capital will seek em- 
 ployment where it finds more security. 
 
97 
 
 Some objectors to a National Bank, have made use of an argument, 
 which if it prove anything, proves too much. 
 
 The large resources of such an institution, are said to enable its con- 
 ductors to exercise an improper influence in the National Legislature. In 
 other words, may enable it to bribe members of Congress. And it is even 
 maintained by some, that such corruption was practised amongst the ef- 
 forts made to obtain a renewal of the charter of the late Bank, in the way 
 of granting loans, if not in that of gratuities. The suspicion itself is un- 
 worthy of being entertained, not so much on account of the Bank as on ac- 
 count of the estimation in which the representatives of the people should be 
 held. But admitting that there were any foundation for such apprehension, 
 how much more reason is there to dread the employment in this way, of the 
 united power of several hundred State Banks. If there be danger in trusting 
 the representatives of the people, to the influence of twenty directors of a 
 National Bank, with a capital of thirty-five millions of dollars, how much 
 more danger must there be in exposing them to the influence of fifteen or 
 twenty thousand directors, and officers of seven or eight hundred State 
 Banks, with an aggregate capital of three hundred and fifty or four hun- 
 dred millions of dollars ; making loans perhaps to the extent of five hun- 
 dred millions. We have seen, that if it were for the interest of the con- 
 ductors of the late United States Bank to have their charter renewed, there 
 is equal reason to believe, that the parties connected with the State Banks, 
 or a great number of them, deemed it for the interest of their institutions 
 to prevent this renewal. And we know how much easier it must be to 
 collect a large amount for promoting a common object from a great number 
 of establishments, and individuals, than to obtain a much smaller amount 
 from a single institution, especially, where secrecy is required in view of 
 anticipated examinations. In the way of loans too, there can be no doubt 
 that the State Banks have a much better opportunity of accommodating a 
 large number of individuals in public life, than a National Bank with all 
 its Branches could have. 
 
 We have then the fact before us, that the late United States Bank not- 
 withstanding all its imputed powers of influence could not obtain a ma- 
 jority of two thirds in Congress ; although more than a majority of the 
 whole number were in favor of its continued existence ; neither could it 
 operate a change on the mind of the individual occupying the Presidential 
 chair, or of his confidential advisers. On the other hand, the issue was 
 precisely such as to meet trie views of the State Banks, whose united mo- 
 ney power was more than ten times that of the National Bank. 
 
 It would be just as reasonable, therefore, to suppose members, who 
 voted on the side of the State Banks, subject to corruption from that quar- 
 ter ; as to suspect those who voted in favor of a National Bank. And 
 there is just as much ground for apprehension, that several hundred State 
 Banks, with their hundreds of millions of capital, might operate upon the 
 mind of a chief magistrate to obtain his veto ; as there is to fear, that a 
 single National Bank, whose concerns are all subject to the inspection of 
 government officers, and of committees of Congress, might employ any 
 considerable portion of its funds, in obtaining from the National Legisla- 
 ture,' by bribery, any indulgences not otherwise to be procured. Especi- 
 ally when it was so well known that all these efforts could and would be 
 rendered abortive by the opposition of a single person for conciliating, whose 
 good will, no efforts had been made. Certainly if bribery were the course 
 to be pursued in a case like this, it would be much more rational for a 
 
 13 
 
98 
 
 body of men to address themselves to the individual possessing the 
 greatest power, especially if the pecuniary circumstances of this indi- 
 vidual were not very independent, than to waste efforts upon two or three 
 hundred members of a Legislature, whose purchased favor after all might 
 prove entirely unavailing. 
 
 Objections of this kind are arguments in favor of a National Bank, as 
 they show the expediency of maintaining a balance of power between op- 
 posite moneyed interests ; each jealously disposed to watch the operations 
 of the other. 
 
 CONCLUSION. 
 
 We have now seen the use of capital, and the importance of economi- 
 sing this use ; the inactivity of capital being equal to the loss of so much 
 power. We have seen the use of Banks, in giving the requisite activity to 
 dormant capital, by their stocks, by their deposits, and by their paper cir- 
 culation ; arid we have seen the necessity of confining the action of these 
 institutions to the employment of real capital, in opposition to the employ- 
 ment of that fictitious capital, which if unchecked, they must be the means 
 of creating. 
 
 We have noticed the difference between real and fictitious capital ; and 
 the mischief arising from an accumulation of the latter wherever it is pro- 
 duced. And we have thence seen the necessity of restricting the opera- 
 tions of all Banks to their proper specie paying limits. 
 
 We have seen too, that without such restriction, fictitious capital will 
 not only be created, and become a source of common disaster, but that it 
 will accumulate in some sections of the country much more than in others ; 
 giving rise to inequalities in the currency, ami consequent instability in 
 the exchanges : thence involving the government in the predicament of 
 adopting on the one hand a hard money system, necessarily depriving the 
 country of the use of so much capital, or on the other, of collecting the 
 public dues in bank paper, variously depreciated, with certain loss to the 
 treasury, while the public burthens, in opposition to an express provision 
 of the constitution, fall unequally upon the citizens of different states. 
 
 We have seen that the sufe guard against the tendency of Banks to 
 create fictitious capital, and the tendency of this fictitious capital to pro- 
 duce unequal depreciations of the paper currency, is to be found in the opera- 
 tion of a NATIONAL BANK of discount and deposit, of sufficient capital, with 
 Branches in the several states. Such an institution, aided by its operation 
 as an agent for the public treasury, and by its faculty of discounting notes 
 and bills, acting as a check upon the issues of other Banks in all parts of 
 the country : the faculties of discounting, and of establishing Branches ', 
 being essential to its efficiency. 
 
99 
 
 We have seen that this operation of a National Bank cannot prejudice 
 the rights, or abridge the legitimate privileges of any well conducted money- 
 ed institution : while it enables the government safely to collect its revenue 
 in Bank paper ; and as safely to keep the moneys accruing from that revenue, 
 in a place assigned by law : without the necessity of abstracting so much 
 capital from circulation, or of confining the amounts, whether in paper or 
 in the precious metals, in vaults and safes : and thus too, without affording 
 to any administrators of the government, the opportunity of influencing 
 wealthy and powerful portions of the community by indirect loans, or pre- 
 mises of such loans ; an influence unavoidably incident to a distribution 
 of the public deposits amongst various favored institutions. 
 
 We have on the other hand, examined the objections made to the es- 
 tablishment of a National Bank, and even to the existence of all Banks, 
 and we have seen that none of them can be founded in a regard for the 
 well being or prosperity of the laboring classes. 
 
 The rich capitalist and his agent, as we have aeen, may object to all 
 Banks, and especially to a National Bank, for it is their interest to keep 
 the business of money lending to themselves. 
 
 The dealer in exchanges, or in Bank bills may very well object to the 
 operation of a National Bank, for he wants no institution to sell bills 
 cheaper than he can do himself; and the greater the difference there is 
 in the currency, and the more instability and confusion there is in the do- 
 mestic exchanges, the better for his trade. 
 
 State Banks may not want a National Bank ; especially a Bank of dis- 
 count, with Branches. They do not want the competition of snch an in- 
 stitution. They may fear that it will lessen their own deposits, and their 
 own circulation, and perhaps take away some of their best customers. 
 Some of them do not like the idea of restriction. They do not wish to be 
 checked. They do not wish to be regulated. Many individuals, too, 
 connected with these Banks, may object. It may interfere with their 
 speculations. They cannot monopolize so much ; nor hold their monopo- 
 lized produce so long. Great capitalists may object. They want high 
 prices even at the expense of a depreciated currency. Banks recklessly 
 managed, and moneyed institutions already insolvent, may object. For 
 the action of a National Bank upon them, must necessarily test their 
 soundness, and expose their mismanagement. A few Banks, too, may 
 object, because they hope to obtain the use of the public moneys them- 
 selves, and to be themselves employed in their several districts as agents 
 of the Government. 
 
 We have inquired how it is that a mistaken apprehension has been 
 formed of the character and operations of a National Bank, amongst a 
 certain portion of the people ; and how it is that this misconception has 
 led to an equal prejudice against all Banks, and all moneyed corporations; 
 and we have traced this prejudice to a certain systematic arrangement, in 
 which the interests of a powerful Bank party on the one side, and those 
 of an aspiring candidate for office on the other, were the only interests 
 consulted. The case, indeed, is a supposed one ; but, whether supposed 
 or real, of the correctness of the application every one can judge. That 
 many of the most active opposers of a National Bank, are equally opposed 
 to a hard money, and to a Sub-Treasury, system, is notorious ; and it is 
 for the people to inquire why this is so. 
 
 We have seen that the ruinous speculation which took place soon after 
 the establishment of the late United States Bank, confined as it was to the 
 
100 
 
 scheming operations of a few individuals, arose from a defect in the char- 
 ter of the Bank, easily provided against upon any future occasion. We 
 have also seen that the strange mismanagement of the existing United 
 States Bank of Pennsylvania, so called, was almost an unavoidable conse- 
 quence of the fact, that this institution was merely a State Bank, abso- 
 lutely incumbered with the immense resources of the late National Bank, 
 for which it was a pretended substitute ; while, like other local institu- 
 tions, it was free from the operation of any existing National Regulator, to 
 check the imprudence or extravagance of its conductors. The absence 
 of such a Regulator operating the ruin of that State Institution, as it has 
 done the ruin of multitudes of others, differing from it only in the magni- 
 tude of their capitals and resources. 
 
 Finally, we have seen the futility of the very feeble objections to a Na- 
 tional Bank, drawn from a mistaken view of it as a monopoly from the 
 difficulty of procuring suitable conductors and from the danger of its 
 supposed influence upon any of the organs of Government. 
 
 We have now, we may say, the whole subject before us. 
 
 Without a National Bank, such as we have described, and such as the 
 country has been perfectly familiar with, the funds of the Government 
 become a means of perpetuating the political power of a few designing 
 men ; and of enabling a small number of individuals to profit by the use of 
 an extraordinary amount of capital, at the public expense. 
 
 Without such a Bank, the taxes, duties, and sales of public lands, must 
 be paid in different States in bank money at unequal rates ; unless re- 
 course be had to a hard money system, depriving every branch of industry 
 of a large part of the available capital upon which it is dependant. 
 
 Without such a National Bank, the issues of the State Banks, and 
 Banking associations, already nearly one thousand in number, cannot be 
 restrained within a specie paying limit; and without such restraint, the 
 operations of most of them, progressing from one degree of excess to 
 another, must terminate in discredit and insolvency. 
 
 Without such a National Institution, the advantages of capital brought 
 into use through the instrumentality of Banks, are lost. For without Bank 
 capital, and Bank facilities, the young and the industrious, and all in mod- 
 erate circumstances, will be unable to purchase on credit, because their 
 notes can no longer be discounted. 
 
 Without a National Bank, the sound State Banks cannot introduce their 
 paper into circulation. The mechanic and th^ laborer will be paid in de- 
 preciated bank notes, the worst bills being the most circulated, and the 
 most unprincipled conductors of the worst Banks most benefited. 
 
 In fine, without a National Bank, the rich may become richer, and the 
 poor will certainly become poorer ; while the whole country must witness 
 the results of reckless speculation in one class, and of despairing idleness 
 in another. 
 
 On the other hand. With a National Bank, possessing the requisites 
 supposed, local Banks capable of being restored, may be assisted. A 
 paper currency equal to specie will circulate through the Nation ; and the 
 enchanges between the different States will be equalized. The local 
 Banks worthy of credit, will be enabled to retain the full benefit of their 
 respective powers ; each performing its functions in its peculiar sphere 
 each enjoying its share of paper circulation, and of public confidence. 
 
 With such a National Bank, the public burthens will fall equally in all 
 the different States, because in all, the revenue will be paid in bank paper 
 
101 
 
 of equal value, without hazard to the Government, and without loss to the 
 country. Real capital, now giving way to fictitious, will come out of its 
 hiding places, as if no longer fearful of contamination ; and real capital, 
 procured at the lowest rate of interest, will be brought from distant places 
 and countries, where it is less wanted, to every region of our territory 
 where there is a demand for it. 
 
 With a National Bank, the South and West will be supplied with new 
 means ; while the North and East are benefited, in proportion as their 
 Southern and Western customers are in better circumstances. The con- 
 fidence of the wealthy, both at home and abroad, in our various moneyed 
 and manufacturing institutions, will revive. The stocks of these will again 
 become desirable objects of investment ; and this accession of real capital 
 will give a new, but not imaginary, value to objects of enterprize, now 
 languishing from want of pecuniary support. 
 
 In fine, with a National Bank, the public moneys will be safe. Safe 
 from peculation, and safe from corrupt abuse ; while the real capital they 
 afford, will circulate, free from the bias of political favoritism, in every 
 channel of industry throughout the Nation. 
 
 Fellow citizens It is for you to judge of the correctness of this com- 
 parison. It is for you, too, to take into consideration the private interests 
 operating upon the minds of objectors to a National Bank. It is for you 
 to compare these interests with the objections made. When called upon 
 to oppose the incorporation of such a National Institution, or to put down 
 the State Banks, or to array yourselves in a pertinatious hostility to all 
 Banks, it is for you to inquiry into the peculiar circumstances, and private 
 reasons, of the individuals making this call upon you. Place their motives, 
 such as you have reason to suppose them, by the side of their objections. 
 Inquire in what respect their circumstances differ from yours, and how far 
 their interests should operate upon your minds. Judge of their arguments 
 as you would of the testimony of a witness upon the stand, for whose 
 prejudices and private feelings, and peculiar relations, you felt yourselves 
 called upon to make suitable allowance. 
 
 The subject is with you. I do not ask your acquiescence in my opin- 
 ions. I ask only your patient, fair, investigation of the whole matter : 
 discussed upon its own merits, apart from all party, or political associa- 
 tions: aided only by the comparison, which the recollections of many of you 
 will enable you to make, between the present state of the country, and its 
 state during the greater part of that period when a National Bank was in 
 full operation. 
 
 If you have hitherto acted under mistaken apprehensions, I ask only a 
 magnanimous expression of your change of opinion. If, after mature 
 consideration, you come to the conclusion that a National Bank of discount 
 and deposit, with Branches in the several States, is essential to the pros- 
 perity of the country, I ask, for your country's sake, that you unite with 
 one voice to demand of your rulers, the incorporation of such an institu- 
 tion. 
 
102 
 
 APPENDIX. 
 
 FOR some years previous to the closing of the operations of the late 
 United States Bank, the greatest difference of exchange charged on inland 
 bills discounted by the Branch in New York, was J per cent. The ex- 
 change on places north and east of the District of Columbia, inclusive, was 
 at par. On New Orleans, Mobile, and seaports in North and South Caro- 
 lina, I to J per cent. On other places, varying only from \ to ^ per cent. 
 
 The following are rates of exchange quoted at New York, 5th Febru- 
 ary, 1842: 
 
 Bills on Philadelphia, 6 and 6i dis. 
 
 Bills on Baltimore, . 3| and 
 
 Bills on Richmond, 8-J and 
 
 Bills on North Carolina, 5 
 
 Bills on Charleston, 1 
 
 Bills on Savannah, 
 
 Bills on Augusta, 4 
 
 Bills on Columbus, 16 and 17 dis. 
 
 Bills on Macon, 13 and 14 dis. 
 
 Bills on Mobile, 14 andH^dis. 
 
 Bills on New Orleans, 6^ and 6f dis. 
 
 Bills on Louisville, 11 and 12 dis. 
 
 Bills on Nashville, 15 and 18 dis. 
 
 Bills on Natchez, 25 and 30 dis. 
 
 Bills on St. Louis, 14 and 15 dis. 
 
 Bills on Cincinnati, 13J and 14 dis. 
 
 Bills on Michigan, 9 and 10 dis. 
 
 The following are the different rates of discount on bank bills : 
 On bills of good Banks in the State, \ to 1^ per cent. ; on bills of 
 doubtful Banks, 20, 25, 37, 40, and 50, per "cent. On bills of Banks in 
 New Jersey, from i to 7 per cent. Pennsylvania, 7 to 10 per cent. 
 Delaware, 8 to 10. Maryland, 5. District of Columbia, 5. Virginia, 
 8. North Carolina, 6. South Carolina, 3 to 4J. Georgia, 10. Alabama. 
 20. Louisiana, 10 to 25. Kentucky, 12. Ohio, 20. Indiana, 17. Illi- 
 nois, 20 to 25. 
 
103 
 
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 CONTENTS. 
 
 INTRODUCTORY ADDRESS. 
 
 PART FIRST. 
 
 Page 
 
 Section 1. Use and Importance of Money Capital, . . 5 
 
 Sect. 2. Discrimination to be made between real and fictitious capital, 8 
 Sect. 3. Utility of Banks in collecting and bringing into use real capital, 
 by their Stocks, their Deposits, and their Circulation, . . 12 
 
 Sect. 4. Tendency of Banking operations to expansions, and to the cre- 
 ation of fictitious capital, . ..... 18 
 
 Sect. 5. Operation of Bank expansion upon the currency, . 23 
 
 Sect. 6. Effects of a depreciation of the currency, . . 24 
 
 PART SECOND. " 
 
 Sect. 1. Advantages of a National Ipank, .... 31 
 
 Sect. 2. Its operation upon the ^jftcal Banjos, ... 33 
 
 Sect. 3. Operation of a National 1 Barvk upon ff^c, domestic exchanges, 37 
 Sect. 4. Operation of a National Bank as a*Fiscal Agent, . 41 
 
 Sect. 5. Operation of a National Ba l nk in bringing forward a supply of 
 
 real capital. . . . - ' ; . . ! j 45 
 
 Sect. 6. Operation of a National Bank in meeting the constitutional 
 
 requisitions, &c. . 49 
 
 PART THIRD. 
 
 Sect. 1. Parties having an interest in opposition to all Banks, or any 
 new Bank. . . . . . . -...-.' ' : ' 54 
 
 Sect. 2. Interests opposed to a National Ifenk-^TSe\case of rich men, 
 and money dealers. . . . V ' '*< * ' '56 
 
 Sect. 3. Case of sellers of foreign exchange. . " . . 58 
 
 Sect. 4. Interests of State or Local Banks, in opposition to a National 
 Bank ....;... 61 
 
 Sect. 5. Objection arising from a suppospd hostility of the people to a 
 National Bank, and to all Banks. . .... 67 
 
 Sect. 6. Objection arising from the management of the late United 
 States Bank Stock speculation Fluctuations in trade Expansion and 
 reaction. .......... 80 
 
 Sect. 7. The United States Bank of Pennsylvania. . . 88 
 
 Sect. 8. Other objections ! Want of suitable conductors Banks regu- 
 lating themselves Corrupt influence. ..... 94 
 
 CONCLUSION. ......... 98 
 
 Appendix 201 
 

 
 v\ 
 
 V\ 
 
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